The Arab Republic of Egypt, is a transcontinental country spanning the northeast corner of Africa and southwest corner of Asia by a land bridge formed by the Sinai Peninsula. Egypt is a Mediterranean country bordered by the Gaza Strip and Israel to the northeast, the Gulf of Aqaba to the east, the Red Sea to the east and south, Sudan to the south, and Libya to the west.
The state has the longest history of any modern country. Considered a cradle of civilization, Ancient Egypt experienced some of the earliest developments of writing, agriculture, urbanization, organized religion and central government. Iconic monuments such as the Giza Necropolis and its Great Sphinx, as well the ruins of Memphis, Thebes, Karnak, and the Valley of the Kings, reflect this legacy and remain a significant focus of archaeological study and popular interest worldwide.
Modern Egypt is considered to be a regional and middle power, with significant cultural, political, and military influence in North Africa, the Middle East and the Muslim world.
Egypt’s economy is one of the largest and most diversified in the Middle East, and is projected to become one of the largest in the 21st century. Egypt is a member of the United Nations, Non-Aligned Movement, Arab League, African Union, and Organization of Islamic Cooperation.
Economy
Egypt’s economy depends mainly on agriculture, media, petroleum imports, natural gas, and tourism; there are also more than three million Egyptians working abroad, mainly in Saudi Arabia, the Persian Gulf and Europe.
The completion of the Aswan High Dam in 1970 and the resultant Lake Nasser have altered the time-honored place of the Nile River in the agriculture and ecology of Egypt.
A rapidly growing population, limited arable land, and dependence on the Nile all continue to overtax resources and stress the economy.
Foreign investments
FDI in Figures
The dynamic growth of the Egyptian economy (around 7% before the crisis), its strategic geographical position, low labor costs, skilled workforce, unique tourist potential, substantial energy reserves, large domestic market and the success of the reforms undertaken by the authorities (including many privatizations) all sharply drove up FDI. The regional context must also be taken into account, as Egypt benefited from abundant liquidity coming from the Gulf States.
FDI decreased as a result of the global economic crisis and later the socio-political revolution of 2011, but then it started growing again. It increased from USD 4.3 billion in 2014 to USD 6.7 billion in 2015. However, Egypt lost 19 places in the 2016 Doing Business report, published by the World Bank (131th out of 189 countries).
Egypt has signed bilateral agreements with more than a hundred countries, including most of the European Union countries, the United States and several African countries, the Middle-East and Asia. On the Mediterranean Basin, Egypt has signed bilateral conventions with Algeria, Spain, France, Greece, Italy, Libya, Lebanon, Malta, Morocco, Portugal, Tunisia and Turkey. In 2010 Egypt signed an agreement with the Mercosur bloc of Latin American nations.
Since 2004, the Egyptian government promotes foreign direct investments, the results of this campaign are rather modest. The taxation and customs red-tape, as well as the rigidity of the labor law causes FDI to come only from big multinational companies. In order to re-establish foreign investor confidence, parliament has recently adopted laws on the promotion of exports in free-trade zones. The intellectual property sector is also benefitting from incentive measures. The Ministry of Investment offers investment opportunities online.
Services
Egyptian communications and information sector enjoys the highest growth rate in the world. Significant needs in marketing, consulting and surveying and modeling go together with the current policy of major construction work.
Industry
The need for investments can be felt in several sectors; the textile and clothing sectors and more precisely weaving, remain very traditional and very government assisted. Other sectors also requiring investments: capital goods, cold chain, packaging, packing, etc.
Infrastructure
There is still a significant need of infrastructures and unexploited sectors, namely in the tourism and cultural sectors, while tourism is the one sector in Egypt that has the highest growth.
A major construction works policy is the government’s priority: a Tochka delta project, a new canal in the Sinai region, some projects of new towns, as well as some ten airports being offered for privatization: Marsa Alam and Borg El-Arab airports, Bahareya Oasis airport, Ain Shokhna and Assiut airports, Sharm El-Sheikh and Aswan expansion projects, and the new Hurgada terminal.
In the energy sector, there is a need to build a power plant as well as to develop the gas sector.
Taxes
Tax evasion is quite common in Egypt because of the complicated and largely ineffective collection system. Employers have developed numerous strategies for sparing their foreign workers the grief of wading through Egyptian tax law – many are paid in cashable checks or employed as “consultants,” the idea being to leave the responsibility for deciding about tax payments to the employee himself.
Income taxes
Sources are classified as follows:
- Income from movable capital: Earnings from interest, executive fees, et cetera, taxed at 30%
- Income from immovable capital: Earnings from land and other real estate investments, taxed at a rate between 20%-48% depending on the nature of the properties
- Commercial and industrial profits: Earnings from business enterprises that are not covered under the corporate tax system, taxed between 20%-48%
- Professional fees: Simply a term used to describe the earnings of professionals such as lawyers and engineers. These, too, are taxed at a rate between 20-40%.
- Salaries: Earnings from a salary paid to you in Egypt or from abroad for services you perform in Egypt. Housing allowances provided by companies for foreigners living in Egypt are exempt from this tax. LE 50,000 of salaries are taxed at a flat rate of 20%, and the amount over that at 32%
Once you have paid taxes on your individual sources of income, you can look forward to paying general income tax, levied on your aggregate earnings. General income tax is applied at a variable rate, at a maximum 65% for earnings totalling over LE200,000 per year.
A thoroughly infuriating “development tax” is levied on all individual and corporate earnings in excess of LE18,000 per year.
Other taxes
If you own any rental or improved agricultural property (essentially if you have invested in real estate), these holdings are taxed at 10% of their annual rental value.
Stamp duty is levied on official documents, generally in a mercifully insignificant amount. Contracts for company formation come with an LE100-300 tax and company registration costs around LE50.
Egyptian sales tax ranges from 10-50% on goods and 5-10% for services. It is usually built into the advertised prices of goods and services.
Corporate Taxes
Tax Base For Resident and Foreign Companies
Residents are taxed on worldwide income while non-residents are taxed only on Egypt-sourced income.
Tax Rate
| Corporate Income Tax | 25% |
| Tax on the profits of Suez Canal Company, Egyptian General Petroleum Company and the Central Bank of Egypt | 40% |
| Tax on the profits of oil prospecting and production companies | 40.55% |
Consumption Taxes
- Nature of the Tax
- General Sales Tax (GST)
- Standard Rate
The standard GST rate is 13% (as of September 2016) with varying rates applied to, for example:
– 1.2% to contracts
– 2.9% to civil construction work
– 25% to televisions, radios, jewelry and certain motors vehicles
– 30% to luxury goods such as cosmetics, video cameras
– 45% to imported cars over 2,000cc
Reduced Tax Rate
Varying rates apply across goods and services. Refer to this Guide for more details.
Exclusion from Taxation
Importers of goods and services for trading purposes, exports, basic foodstuffs, catering, natural gas, books and magazines and goods used for scientific, educative and cultural purposes as well as goods and equipment used for defense and national security and in line with guidance by the Ministry of Foreign Affairs are tax exempt. For more details refer to the EY tax guide.
Method of Calculation, Declaration and Settlement
The General Sales Tax (GST) is levied on the supply of most goods and services at a standard rate of 10%. Providers of goods and services with turnover above EGP 54,000 must register for sales tax. Wholesalers and retailers with turnover above EGP 150,000 must register for sales tax. Rates range between 1.2% to 45% for qualifying foods and services and 1.2% to 10% for construction activities.
Other Consumption Taxes
Excise duty is also collected on alcoholic drinks and coffee. An additional duty is collected on brandy, cognac, gin and whisky.
Individual Taxes
Tax Base for Residents and Non-Residents
Non-residents are subject to tax on income earned or realised in Egypt only.
Dividends paid to non-residents are not subject to withholding tax under Egyptian domestic law.
Tax Rate
| Individual income tax (from 1 Jul 2005) | Progressive rate from 0% to 25% |
| Up to EGP 5,000 | 0% |
| From EGP 5,001 to 30,000 | 10% |
| From EGP 30,001 to 45,000 | 15% |
| From EGP 45,001 to 250,000 | 20% |
| From EGP 250,000 to 1,000,000 | 25% |
| Above EGP 1,000,000 | A temporary surchage of 5% applies for 3 years effective from 2014 |
| On amounts received by resident employees from entities other than their original employers | 10% |
Allowable Deductions and Tax Credits
Available tax deductions include: a personal deduction of EGP 7,000 annually, social insurance contributions, employees’ contributions to private insurance funds, premiums for life and health insurance for self or dependents, as well as general costs (rent, depreciation, social insurance contributions etc.).
Special Expatriate Tax Regime
No special tax regime for expatriates.
Capital Tax Rate
The sale of real estate in Egyptian cities is taxed at 2.5% of the value of the property.