Egypt payroll and tax overview.

Egypt lies on the south eastern shores of the Mediterranean and represents an intercontinental gateway between North Africa, the Mediterranean, and the Middle East. Regarded as a cradle of civilisation, Egypt has always been an important political and economic power in both a regional and global context. A monarchy until the mid-20th century, Egypt emerged from its 1952 Revolution as a republic and after a period of economic unrest in the second half of the century, introduced a range of liberal reforms which stimulated domestic and international investment. While historically reliant on its agricultural industry, in the 20th century, Egypt diversified its economy, developing its energy and oil and gas industries. Tourism has also become a significant part of Egypt’s economic profile thanks to the country’s rich history and heritage. Today, Egypt is one of the largest economies in the Middle East and the second largest in Africa: in 2019 its GDP was estimated at $355.6 billion with a growth rate of 5.6%. Egypt is a member-state of the UN, the Arab League, the African Union, and the Organisation of Islamic Cooperation. In 2019, it was ranked 114 on the World Bank’s Ease of Doing Business Survey.

Why Invest in Egypt?

Investors will find numerous reasons to target Egypt, including:

• Economic strength: Egypt showed impressive resilience in the wake of the 2008 global financial crisis - continuing its transition to a strong, stable and modern economy. The IMF predicts Egypt’s growth rate will reach 6% growth by 2023.
• Continental gateway: At the crossroads of Africa and the Middle East, businesses in Egypt benefit from access to diverse consumer markets of tens of millions of people. The Suez Canal is a vital connection between East and West - and facilitates around 8% of the world’s maritime shipping every year.
• Government incentives: Amongst a range of investment-friendly policies, Egypt’s government also offers a range of incentive schemes for foreigners, including General Authority for Investment and Free Zones (GAFI), reduced taxes and customs duties, and reduced land costs.
• Infrastructure: World class infrastructures are supporting Egypt’s economic progress. Mobile phone coverage in Egypt is almost 100% of inhabited land, while broadband is highly accessible in the country’s urban centres. Egypt is served by a network of 15 seaports, 20 airports, over 9,000km of railway, and over 100,000km of road.
• Competitive tax: Egypt’s tax system has been overhauled as part of financial reforms. The corporate tax rate is set at 22.5% (40.55% for oil exploration companies), while its tax authority has simplified both the tax code and the audit system.

Foreign Direct Investment in Egypt

Egypt is one of the major oil and gas producers, and there remains a significant need for investment in the power infrastructure. Egypt hosts a number of vast trading sectors, including: Construction, Architectural and Engineering Services, Healthcare, Telecommunications, Water and Wastewater, Chemicals, Pharmaceuticals, Renewable Energy, Education and Training Services, Electric Power Generation, Port and Shipbuilding Equipment, Consumer Goods and Safety and Security Equipment. Meanwhile, consumer goods provide the highest profit margins.

Political violence and uncertainty have taken a heavy toll over recent years, but modern Egyptian society has proven resilient. Foreign firms, though wary, have not abandoned the country.

Egypt’s government welcomes foreign investment and has various tax breaks to encourage foreign investment in the country.

Registering a Company and Establishing an Entity in Egypt

A company is required to have a legal entity established in Egypt in order to process a payroll.

For integrating a company under the Investment Law in Egypt, the Investor has to conclude the endeavours of incorporation at GAFI (General Authority for Investment and Free Zones) to establish the company. The GAFI is a one-stop Business Services Centre. All business-related Egyptian Government agencies are now located under one roof. GAFI is empowered to negotiate and sign contracts, apply for licenses and approvals on behalf of all parties.

Foreigners may establish or acquire Egyptian companies.

Procedures for Establishing Companies in Egypt

The contract for establishing the company is submitted provided it follows the fields stipulated in Investment Law in Egypt.

The draft contract should enclose the following:

• Data form for the company, including purpose, capital, investment costs, and statement of partners, location, and expected labour
• Certificate determining the viability of company name, issued from the Commercial Register of Investment (at Ministry of Economy & Foreign Trade)
• A Bank Deposit Certificate with not less than 25% of the capital of joint-stock companies and 100% of the capital of companies with limited liabilities

The contract is assessed and authorised within 24 hours from the date of application. It is mandatory to legalize the signature of the lawyer who prepared the contract from the Bar Association in Cairo. After legalizing, it is submitted to the authority in order to issue a licensed decree with the establishment of the company within 24 hours from submitting the completed contract.

The applicant receives an official copy of the decree of the authority with the license to establish the company, enclosing an official copy of the contract and a letter to the competent commercial register office. The investor should provide the authority with a copy of the commercial register of the company after its registration.

Business Banking in Egypt

Banking hours are 8.30am to 2:00pm (Sunday to Thursday) in the major towns and cities, with smaller towns and villages operating a more varied timetable. To open a bank account in Egypt, the employee will need supporting official documentation, such as a passport, work visa and Residence Certificate, letter from home bank and some recent bank statements and passport-size photograph to verify identity.

Working Days and Working Hours in Egypt

A full workweek is generally considered as five eight-hour work days in Egypt, from Sunday through Thursday (to a maximum of six full days, which would generally add Saturday as the sixth).

Basic Facts about Egypt

General Information

Egypt is situated at the continental junction of Asia and Africa, and is a regional gateway between North Africa and the Middle East. Civilization in the territory, which became Egypt stretches back to prehistory, and saw the rise of a prolific empire, and the creation of architectural wonders such as the Sphinx and the Pyramids. Egypt was assimilated by various world powers over millennia - and was most recently ruled by Britain and the Ottoman Empire. Gaining its independence in 1922, Egypt gradually became a regional power - although it is still considered to be a ‘middle power’ on the world stage. Egypt’s climate is predominantly hot and dry, and much of the country is covered in desert terrain. The location of a range of ancient landmarks, and stretches of beautiful coastline, Egypt has become an incredibly popular tourist destination for visitors from across Europe and the world.

Full Name: Arab Republic of Egypt

Population: 102.3 million (World Bank, 2020)

Capital: Cairo

Major Language: Arabic

Major Religion: Islam (90%), Coptic Orthodox Christian (9%) and other denomination of Christianity (1%)

Monetary Unit: Egyptian Pound (“Livres Egyptiennes”) 1 Egyptian Pound (EGP) = 100 piastres

Main Exports: Crude Petroleum, Petroleum Gas, Refined Petroleum, Gold and Nitrogenous

International Dialling Code: +20

The Tax Year in Egypt is 1st January to 31st December.

It is the employer’s responsibility to file quarterly tax returns. The employer has one month after the end of each quarter to file the returns. Additionally, the employer is required to file annual salary tax reconciliation outlining salaries paid to each employee, deductions, exemptions, tax due, and the net salary paid to each employee.

The penalty of 1% per month is added for the late submission and payment of tax and social security contributions.

Income Tax in Egypt

Residents and Non-Residents

All employers are required to calculate the salary and tax on the monthly basis which need to be remitted to the relevant tax offices within the first 15 days of the following month.

An employee on a Temporary Residence Permit or no citizenship status will be required to file a Tax Return on 1st January each year. Additionally, the employer is required to file a quarterly tax return. The employer has one month after the end of each quarter to file the quarterly tax returns.

At the Year-End, the employer is required to prepare an annual reconciliation of the salary tax to determine whether there are any disparities and to remit such tax disparities, if any, to the competent Tax Office within January of the following year.

Penalties are obligatory in the case of not complying with the due dates at 2% plus the discount rate declared by the Central Bank of Egypt. The discount rate is currently 11% (approximately).

The Egyptian constitution specifies that the state must insure Social and Health Security Services and Retirement, Unemployment and Old Age Pensions for all citizens.

Employees benefit from the social security system in Egypt which provides insurance for all workers, whether they are subject to the Labour Law, state or public sector employees. The legislator did not make any distinction between workers in the government sector and workers in the non-government sector.

The social security system shall include the following:

• Old Age, Disability and Death Insurance
• Occupational Accidents Insurance
• Sickness Insurance
• Unemployment Insurance
• Social Care for Pensioners

The current Public Program in Egypt covers approximately 80% of employees, which is the highest among the developing nations. Contributions are based on two components:

• Floor amount for year 2021 is 1,200 Egyptian pounds a month
• Cap amount for year 2021 is 8,100 Egyptian pounds a month

Reporting Tax in Egypt

Monthly contributions should be made to the tax authority within 15 days of the following month.

Monthly contributions for social security payments should be made within 15 days of the following month.

Annual salary reconciliation, including the name of all employees, gross income, and tax calculation per year, has to be submitted before end of January of the following year

Key Legislative Authorities

• Investment Authority, Salah sales, Cairo.
• Tax authority, 5 Hussien Hegazy Street, Cairo.
• Social Insurance Authority, 5 Lazoghly Sq Monera, Cairo.

New Employees in Egypt

In Egypt, the payroll and registrations of a new employee are the responsibility of the employer. All new employees have to be registered with the local authorities within 15 days of commencing employment.

Documents required for setting up a new start include:

• Employment Contract
• National ID
• Education Certificates
• Form (1) for Social Insurance
• Birth Certificate
• Valid Passport
• Work Permit

Leavers in Egypt

Payment for leavers is made in the employee’s last payslip. An employee’s final payment must be remunerated by the end of the month and social security must be notified of the termination of the employment contract.

Payroll in Egypt

Generally, income tax is withheld at source by employers in Egypt - and remitted to the tax authority within 15 days of the end of the payment month. Employers must also withhold social security contributions from employee salaries, and remit those amounts to the Social Insurance Organisation. Employers with global employee populations should note that residency status is relevant to tax payments in Egypt: resident employees are taxed on income earned within Egypt and on a worldwide basis, while non-residents are charged only on tax earned within Egypt.

Social security in Egypt includes provisions for retirement, disability, injury and death, and unemployment. Social security contributions are charged at different rates depending on the type of insurance scheme:

Basic insurance: 26% for employers, 14% for employees

Variable insurance: 24% for employer, 11% for employees

Employees may be provided with online payslips in Egypt, and payroll reports must be kept for a minimum of five years. In order to achieve compliance with Egypt’s tax and payroll regulations, foreign businesses may wish to use a global payroll service provider. Using a payroll provider is a way to achieve regulatory compliance quickly, and ensure pay is delivered efficiently to a global employee population.