Egypt Slashes Corporate And Personal Tax Rates

by Lorys Charalambous, Tax-News.com, Cyprus

15 July 2005

Egypt is introducing sharply lower rates of corporate and personal taxation from 1st July. Under the new code, which has been working its way through the debate and drafting process since September, most companies will pay 20% tax on their profits.

Under the previous tax system, industrial and export firms paid 32%, while most other companies paid 40%. The new tax code preserves tax exemptions for profits from stock exchange investments, on dividends paid to shareholders and on interest payments from banks and bonds. Current exemptions given to companies in free trade zones and industrial zones will be abolished, however, at least for new entrants.

For individuals, the maximum tax rate is now 20% instead of 40% and the thresholds for each tax bracket have been raised. Individuals will pay 10% tax on income between 5,000 and 20,000 Egyptian pounds ($862 and $3,448) a year, 15% on income between 20,000 and 40,000 pounds a year and 20% on any income above 40,000 pounds. Under the previous system, the maximum rate of 40% kicked in at a threshold of 16,000 pounds.

Finance Minister Youssef Boutros Ghali says that the tax cuts will cost the treasury 3.5 billion to 3.6 billion pounds a year but that the money would be recovered through increased economic activity.

The country's 2005/6 deficit is expected to be equivalent to 9.2% of gross domestic product (GDP), compared with 10.3% this year.

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