Salary tax and similar payments
Answers to the questions we hear most often on salary tax, returns, exemptions and employer obligations.
Q01Who must file the quarterly return required by Article 15(1) of Income Tax Law No. 91 of 2005?
Employers and payers of taxable income, including companies and projects operating under the free-zone regime, must file a quarterly return with the competent tax office in January, April, July and October each year, on the prescribed form, as set out in the Executive Regulations.
Q02When is a taxpayer (employee or worker) exempt from filing an annual tax return?
A taxpayer is exempt from filing in two cases:
Where their income consists only of salaries and similar payments, whatever the amount.
Where their income consists only of salaries and similar payments plus income from real estate, and their net annual income from these does not exceed EGP 5,000 (the exempt bracket under Article 7 of the Law).
Q03When must a taxpayer (employee or worker) file an annual tax return?
A taxpayer must file an annual return in two cases:
Where, alongside salary income, they also earn income from a commercial or industrial activity or from a non-commercial profession, whatever the amount.
Where their combined income from salaries and real estate exceeds EGP 5,000 a year (the exempt bracket under Article 7 of the Law).
Q04How are daily-wage workers taxed on salaries and similar payments?
The Law treats regular and daily-wage workers the same way. Taxable income is determined pro rata for each part of the year in which income was earned, after annualising the monthly income, and both the EGP 5,000 exempt bracket under Article 7 and the EGP 4,000 personal allowance under Article 13(1) apply.
Q05Can an employee object to the amount of tax withheld, and to whom?
Yes. The employee submits a request to the employer that made the deduction within 30 days of receiving the salary. If there is no such employer to object to, the objection may be filed, within the same period, with the competent tax office or appeal committee, as applicable.
Q06Can an employer object to payroll-tax differences arising from an examination?
Yes. The employer may object to tax differences arising from an examination within 30 days of receiving the notice, under Article 118 of Law No. 91 of 2005.
Q07Is a 10% deduction for the cost of earning income allowed under Law No. 91 of 2005?
No. Law No. 91 of 2005 did not provide a 10% deduction for the cost of earning income. Instead it increased the exempt bracket (EGP 5,000) and the personal allowance (EGP 4,000).
Q08How are amounts an employee receives from an entity other than their main employer taxed?
Amounts received from an entity other than the main employer, whether or not the person is seconded, are subject to salary tax at a flat final rate of 10%, with no deduction for costs or any other allowance. No tax exemptions apply to these amounts.
Q09How is a meal allowance paid to employees taxed?
Article 13(5)(a) of the Law expressly exempts meals provided to employees, provided they are in kind and provided collectively. If the employer instead pays cash in lieu of the meal, the payment is a cash benefit subject to salary tax, borne by the employee who receives it.
Q10How is a cash allowance paid instead of company group transport taxed under Law No. 91 of 2005?
Article 13(5)(b) expressly exempts group transport provided to employees, or its cost, provided it is in kind and collective. If the company runs its own vehicles to transport staff, or hires vehicles from a third party for group transport, the cost is not a taxable benefit; that is what “or its cost” means. If the company instead pays an employee a cash allowance in place of group transport, that amount is a cash benefit subject to salary tax.
Q11How is employees' statutory profit share taxed?
Article 13(6) expressly exempts employees' share of profits distributed in accordance with the law. That share is not a deductible cost for the company when its own taxable base is determined.
Q12How are board membership fees and allowances in capital companies taxed?
The Law contains no provision subjecting board chairs' and members' membership fees or allowances in capital companies to salary tax or any other tax. However, under Article 52(4) of Law No. 91 of 2005, these fees and allowances are not deductible costs when the company's taxable base is determined.
Q13How are profit shares, dividends and general-assembly attendance fees paid to shareholder board members taxed under Law No. 91 of 2005?
The Law contains no provision subjecting these profit shares, dividends or attendance fees to salary tax or any other tax. They are, however, not deductible costs when the company's taxable base is determined.
Q14How are salaries and bonuses paid to non-shareholder board members of public-sector and public-business-sector companies taxed?
They are subject to salary tax, in the same way as any other taxable employee.
Q15How are salaries and bonuses paid to board members and managers of capital companies for management work taxed?
They are subject to salary tax like any other employee, with no cap on the amounts or on the number of such members.
Q16How is cash paid for unused leave on termination of service (death, resignation or retirement) taxed?
Cash paid for an accrued leave balance on termination of service, whether through death, resignation or retirement, is exempt from salary tax under Law No. 232 of 1996.
Q17Are actual costs an employee necessarily incurs to do their job taxable income?
No. Actual costs necessarily incurred in performing the job are not part of income subject to salary tax; under the general provisions of the Law they are treated as reimbursement of an actual cost.
Q18Does a retiree who takes up employment benefit from the exemptions in Articles 7 and 13 of Law No. 91 of 2005?
Yes. A retiree who takes up new employment is taxed on their earnings like any other employee and receives the exempt bracket and personal allowance under the Law. Their pension remains non-taxable, and the new employer is treated as their main employer.
Q19What rates apply to net taxable income from salaries and similar payments?
Under Article 8 of Law No. 91 of 2005 as originally enacted:
Over EGP 5,000 up to EGP 20,000: 10%.
Over EGP 20,000 up to EGP 40,000: 15%.
Over EGP 40,000: 20%.
Q20What late-payment charge applies when employers or payers fail to remit tax on time, and when does it start?
The late-payment charge accrues from the day after the remittance deadline and is calculated at the Central Bank of Egypt's announced credit and discount rate plus 2%.
Q21Does an employee who works only part of the year receive the full exempt bracket and personal allowance (EGP 5,000 and 4,000), or a pro-rata amount?
A pro-rata amount. Under Articles 7, 8 and 10 of the Law, an employee who works part of the year receives these exemptions in proportion to the period worked.
Q22Who is responsible for remitting the tax to the Tax Authority?
Employers and payers of taxable income. They withhold tax on account from the amounts they pay, as set out in the Executive Regulations, and remit it to the competent tax office within the first 15 days of each month for payments made in the previous month. If the employer or payer is not resident in Egypt and has no office or establishment there, the recipient of the income is responsible for remitting the tax.
Q23What are an employer's obligations to the Tax Authority and to its employees?
To the Tax Authority, the employer must:
Withhold tax on account from amounts it pays and remit it within 15 days of the following month.
Pay any tax differences arising on examination, without prejudice to its right to recover them from the employee.
File a quarterly return in January, April, July and October.
To the employee, the employer must provide on request a statement showing the employee's name, the amount and type of income, and the tax withheld.
Q24What is the penalty for failing to file a tax return where an employee is required to file?
Article 135 of the Law provides for a fine of not less than EGP 2,000 and not more than EGP 10,000 for anyone who fails to file a tax return.
Q25What is the penalty where employers or payers fail to withhold, deduct or remit tax on time?
The original answer repeats the previous one: Article 135 of the Law provides for a fine of not less than EGP 2,000 and not more than EGP 10,000 for anyone who fails to file a tax return. This answer is awaiting review by SCO.
Q26How are special allowances (al-ʿilawat al-khassa) treated when calculating salary tax on basic pay?
The first paragraph of Article 13 preserves tax exemptions granted under special laws. Because these special allowances are expressly exempted by the laws that grant them, they are exempt from salary tax under those laws.
Q27How are variable wages paid in respect of special allowances merged into basic pay taxed?
Special allowances are exempt under the laws that grant them, whether or not they have been merged into basic pay. However, variable wages paid in respect of special allowances that have been merged into basic pay are taxable and do not share the allowance's exemption. This follows an opinion of the General Assembly of the Fatwa and Legislation Departments of the State Council, adopted by the Tax Authority.
Q28How is income received by foreign diplomatic and consular staff and international-organisation officials in the course of their official duties taxed?
Article 13(7) exempts salaries and similar payments received by members of the diplomatic and consular corps, international organisations and other foreign diplomatic representatives in the course of their official duties, subject to reciprocity and to the extent of it.
Q29How are local staff of embassies, consulates and international organisations in Egypt taxed?
The Law contains no exemption for employees of embassies, consulates and international organisations who are not themselves members of the diplomatic or consular corps or of the organisation. Their salaries for services performed in Egypt are therefore subject to salary tax, taking into account any applicable double-taxation treaty.
Q30What are the limits on the exemption for contributions to private insurance funds (Law No. 54 of 1975), life and health insurance premiums for the taxpayer, spouse or minor children, and pension insurance premiums?
Article 13(3) and (4) exempt:
Employee contributions to private insurance funds established under Private Insurance Funds Law No. 54 of 1975.
Life and health insurance premiums paid for the taxpayer, their spouse or minor children, and any premiums paid to secure a pension.
The same Article caps the total exemption at 15% of net income or EGP 3,000 a year, whichever is greater, and the same contributions and premiums cannot also be exempted against any other income listed in Article 6. The legacy answer then explains the cap as follows:
Where 15% of income is less than EGP 3,000, the maximum deduction is EGP 3,000, and the deduction is the amount paid or EGP 3,000, whichever is lower.
Where 15% of income exceeds EGP 3,000, the deduction is the amount paid or 15% of income, whichever is lower.
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