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Egyptians taxation CH 2
Salary and the like tax
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© Fourth Grade ©
I Sheet (2)
Taxation ~
Chapter 2
Sherif Tawfik Chapter 2
Salaries and the Like
Salaries (or pays) are sums paid to employees for work
@ i ; they rei
government, units of local administration, societies & commutes
= & companies.
(Private Sector, Public sector or public business sector)
There is a difference between wages and salaries (Pays)
« Salaries: are paid for intellectual or mental work paid periodically
often monthly
. Wages: to receive daily or weekly retum for manual work he renders
to private enterprises, companies, etc.
| Salaries (Pays) & Wages are subjected to tax
l
Tax on salaries is calculated annually but collected monthly
Therefore, tax is first calculated on an annual basis, then tax due
per month is calculated on the basis of tax due per year + 12 GME
Taxable Revenues:
4- Basic salary:
Fixed during the year, and insurance when employee recej
er calcat Tae rye ceived a
2 —Variable wages:
Any other amounts obtained by the employee during the year, such as:
= Remunerations (
Exempted by special law @2 GUE WS tn pgoyhi ary tars ions
Deductions
1- Sums exempted by Special laws, Such as:
~ Special increments (iat 5 a0)
- Social increments Fstagyy Sp)
2- Personal exemption of LE 9000 Annually
3- Share of employee in
Monthly amount:
4 Subscriptions Of Special insurance fund and Life & Medical
insurance Premiums
2
‘The insurance must be on the taxpayer ite, on his own favor orin favor of his
wife or his minor children
Y ‘Should not exceed 1594 of Net revenue or
E10,000 whichever is less
5- Allowances exempted by special laws such as:
™ Representation allowances for employees in Government sector only,
™ Allowances to meet actual 2xpenses such as housing, food, transportation
and clothing allowances
™ University allowance
___ Cae eT
Lh
eatin Salary Tax base
(Taxable Net Revenue)
Basic Salary
variable Wages:
Work nature allowance
Representation allowance
Transportation allowance
Food allowance
Travel allowance
Special increment
Social increment
Incentives
Overtime
RRRRARKRK
Total Revenue
Deduct from it
> Sums exempted by special laws
Special increment
Social increment
Representation allowance (GOV. Sector only)
> Personal exemption 9
> Share of employee in social insurance
> Sums to meet actual expenses
Total deductible
Net taxable Revenue
Deduct from it
> Subscriptions in special insurance fund & life
insurance premiums: ‘ (x)
15% x Net Revenue Ox xX)
Fixed Sum 10,000 a oil ea =
Actual Paid 100% Adio»
RRS RRR
(29)
Annual Tax base x
The nearest L.E 10 down
Note: Tax on salaries is calculated annually but collected monthly Therefore, tax is first calculated on an
annual basis, then tax due per month is calculated on the basis of tax due per year + 12 CME clo)
Special cases
Fringe (in-Kind) Benefit (sige! Uljoll)
« They are all services Rendered (d
in addition to salaries, (done) by enterprise to their employees free of chats
+ The value of these services are subjected to tax as follows:
A- Company Motorcar put at full personal disposal:
* The benefit shall be fixed at 20% of their costs:
(Fuel, insurance and periodic maintenance) Whether the car is rented or owned
Examp!
A private sector company employee was assigned a car owned by the company to be at
personal disposal of him. The utilization of the car coastedfuel, insurance, and periodic
maintenance of EGP 20,000 during 2021.
Required: Calculate the in-kind personal benefit taxable for 2021
Solution:
Taxable in-kind benefit = EGP 20,000 x 20% = EGP 4,000
‘Added to total taxable revenue of the employee
ellphones (Mobiles)
© The benefit shall be fixed at 20% of their costs
‘© Costs of purchase of mobiles not included in these benefits
Example:
[private sector company employee was assigned a cellular to be at personal disposal of him.
‘The subscription of the cellular for July 2021 amounted to EGP 1000.
Required: Calculate the in-kind personal benefit taxable for July 2021
Solution:
Taxable in-kind benefit = EGP 1000 x 20% = EGP200
‘Added to total taxable revenue of the employee a WAS C1)
c- Loans and debts rendered by employer:
> Allloans from the employer to the employee
e Ifthe loan without interest = the benefit is 7%
Ifthe loan with interest less than 7% = the benefit will be 7% (-) Theinterest charged
‘Ifthe loan with interest higher than 7% = No benefit
@ The alue ofthe loan received by the employee should exceed the value ofthe last 6 months of
gross salary received by the employee prior receiving the loan.
Example: (Loans and debts rendered by employer)
Ifthe amount obtained by an employee through the last 6 months;
priorreceiving the loan from his company
‘amounted to LE 20,000 what is the Fringe benefit in the following cases:
| Loan Value Loan Return Taxable fringe benefit
[ Le25,000 0% N/A
LE 20,000 0% N/A
LE 30,000 0% 30,000 — 20,000 X 7% = LE 700
LE 30,000 ™ N/A
LE30,000 3% {30,000 20,000) X 2% = L-E 200
eee |
insurance on the life of the employee, his family or properties:
D- Policies of i
of the premium amounts borne by the
The benefit shall be valued on the basis
employer and paid during the year.
F- Company shares granted at a value lower than the market price of theshare
«The benefit shall be determined based on the difference between the market value at
the date of acquisition and amount invoiced to employees.
© If there isa restriction there will be no benefit unless its been removed
Example
‘An employee works for a private sector corporation and was granted 150 shares from the
corporation in 2021 for L.E 9 par value and the market value is L.E 14 per share
Solution Tax in-kind benefit = 150 x (14-9) = LE 750
a 7 ee cca 4" / Taxation
ind) Benefit (ucsl> (Exempted from Tax)
2 collec
4-The value food meal but delivered on work site
2-The cost of collective transportation.
3-The cost of health care, for workers
4-The cost of tools and clothes necessary for performance of work
5-The amount of housing (lodging) unit, whether owned or rented from a third party.
3- Foreign Expert
Example 1: (Foreign Expert)
A company of the Egyptian private sector concluded an agreement witha
foreign expert to work in Egypt during 2021
- The contract period is 3 months
- He shall be paid in Egypt an amount L.E 20,000 per month
Required
Calculate tax due
SOLUTION
Total taxable revenues = 20,000 x 3 (months) = LE 60,000
(-) Personal exemption = 9000 x (3/12) = 2250
Net taxable revenues ( tax base) = (60,000 - 2250) =57750
[
Tax Due:
LE 15,000 Exempted
LE 15,000 2.5%
LE 15,000 10%
LE 12,750 15%
Total Tax due e 2: (For in Expert)
Cee of the Egyptian private sector concluded an agreement with a foreign
acoml to work in Egypt from 19 of July until 18 of August 2021
= fat learn that, he shall receive in Egypt total amount of $2000, if $1 =L.E 16
Required, Calculate the tax due in two cases:
4- The foreign expert borne the tax due
2- The company borne the tax due
solution
Lt
Total taxable revenues = $2,000 x 16 = L.E 32,000
(-)
Personal exemption = 9000 x ( 30/365) = 740
Net taxable revenues ( tax base) = (32,000 - 740 ) = 31260
LE 15,000 Exempted =
3
LE 15,000 2.5% oe
LE 1,260 10% -
Total Tax due Ee
e
In this case, tax paid by the company shall be considered a cash benefit to hl
expert, thus taxable. The revenue subject to taxis: 31,260 + 501= LE 31,7!
LE 15,000 Exempted
LE 15,000 2.5%
LE 1,760 - 10%
Total Tax due
4- Sums received by resident person in Egypt
other than the original place of work:
‘These sums are subjected to tax at rate of 10% without any deduction to
meet costs.
‘The original place of work means that place which the employee gets his
basic salary. amounts received by chairmen and members
of board of directors
4- Salaries and remunerations (clits) of chairmen and members of
board of directors, in public sector companies and public business
sector:
A- who are not shareholders: These amounts subject to tax on salaries.
B- who are Sharel
holders shall not be subjected to tax” Because they
are not employees.
- Also this amounts not considered deductible cost from profits of
the company
= This means that, these amounts subject to tax as apart of profits of
the company.
2- Salaries and remunerations of chairmen and members of board
of directors, in private sector companies
Private associations of capital we mean:
1. Shareholding companies
2. Limited partnership by shares
3. Limited liability companies Salaries and remunerations of dl
hairmen and m
ember: i
Managing directors in these com oe Girectors and
Panies shall be treated as follows:
“ated as follows:
Managing directors:
€S are not Subjectex
A. The Chairman and
Remunerations and allowance
(NY alee lee 9 les us)
d to tax,
But the amount for administrative work i subjected to tax on salaries,
B. The Ordinary members:
Remunerations and allow.
Not considered deductib|
fances shall not be Subjected to tax, because these amounts
© Costs from profits of the company,
2- Limited pa rtnership by shares
- Owned by two types of partners : Gen
Salaries and remuneration of the mai
Subjected to tax on salaries
eral and Limited partners
nagers for administrative work are
3- Limited liability companies ae
- These companies owned by number of partners not less than Two a
than Fifty (and its capital is in the form of stocks) cee
Companies are managed by a manager or from the ae ae
: five wi
- Salaries and remuneration of the managers for administra
subjected to tax on salaries. Examples
je 1:
/ ‘an employee in private sector and get
month of September, 2021 the following Mounts during th
ing the
3000 Basic salary
500 Representation allowance
300 Work nature allowance
100 Transportation allowance
250 Special increment (otto meet acta expenses)
20,000 Encouragement reward
If you learn that
1, He pays 500 annually insur,
5 fance premi is it
annually in spect cee rie ‘emium on his life for his favor and 100
2, The share of employee in
Required, Calculate the taxd
OLUTION
Social insurance isLeSa7 monthly,
lue for the Month of September, 2021
Tax base
Basic Salary (3000 x 12)
Representation all. (500x 22) con
Work nature all. (300 x 12) oe
Transportation allowance. (10x12) 1.200
Special increment not added (250 x 12) 3,000
Total taxable Revenues
Deduct from it
> Sums exempted by special laws —_
> Personal exemption 900
> Social insurance (517 x12) 6,204
Total (15,204)
Net taxable revenues 34,596
Deducted:
49,800
> Life insurance
34,596 x 15% = 5,189
Fixed Sum = 10,000
Actual Paid =[600] coul phy Jil uy (en)
33996
Annual Tax base
a 2 res pation tax due for the month
33,990
you!
pe
£ LE 15,000
LE 15,000
LE 3,990
Monthly tax = 774/12 = 64.5
ue on encouragement rewards
45,000 - 3,990 = 11,010 x 10% =1 191
20,000 - 11, 010 = 8990x 15% =1,348.5
20,000 LE
So, tax due = 2,449.5
Example 2:
An employee in private sector and gets monthly in 2021:
2000 Basic salary (included L.E 300 exem,
300 Representation allowance
150 Work nature allowance
50 Cash allowance For food
200 Special increment not added to basic salary
Ifyou know that:
1, He has granted on 1/7/2021 a periodical raise 1000
2. He received at the end of the vear 7200 for work performed abroad and paid by
Egyptian treasury and 2800 for works performed in Egypt and paid by foreign
treasury in Egypt
3. He received a loan from the Co. 51,200 without return, at first July 2021
4. He received a monthly 1000 allowance for his member of board of an
shareholding Co.
5. He received production incentives at the end of the year 5940.
6. He pays 5300 annually insurance premium on his life to his wife and 100
monthly in special insurance fund.
7. He pays social insurance 2,000 for the year.
ipted special increment)
Required, Calculate the tax base for 2021
Ls er ax base
asic Salary (2000 x 6) (3000 x 6}
representation all. (300x 1
Work nature all. (150 x 12)
Foods cash all. (50 x 12)
Special increment not a
The nearest L.E 10 down
idded (209
Fringe benefit (Loan) oe 6
Incentives 209
* Works performed in &; $340
BYPt, paid ;
Revenues for works Performed abroad, a yore Treasury Sa |
tian treagun, | 2800 | 2820)
'Y | 7209
Total taxable Revenues |
56,370
Deduct from it
> Sums exem ited by special laws:
Special increment added (300 x 12)
> Sums to meet actual expenses oo
> Personal exemption =
> Social insurance oe
100
Total (14,600)
Net Annual Revenue 41,770
Deducted:
> Life insurance . : (6,265.5)
41,770 x 15% = 6,265.5 ADIN BS oil us,
Fixed Sum = 10,000
Actual Paid =(5300+(100 x12)= 6,500
+35,504.5
Taxable Net Revenue (Tax base) 35,500
ee
TT es:
ose
t j gmount throu th the last ¢ Months
jo2 7000 x 6)
salary ( ntation allowance (300x 6)
tees allowance (150 x 6)
Wor trash allowance (506)
toe ingceart not sdics (200 x 6)
France of board Co (1000 x6)
51,200 22,200 = 29000 x 7% =2,039
lowanee and remuneration for his mel
company, shall not subjected to tax on
considered deductible costs from reve
subjected to tax as part of net Profits
salaries because this amount are not
nues of the company, and therefore
of the company. jee
se in private sector and gets
ane
iesalary (included LE 300 exer,
3200 oan sentation allowance
'
llowance
300 Work nature al
150M owance For food
Monthly in 2021;
Pted special ing,
Tement)
ish
Special increment not added to basic Salary
50
°
oa salary monty forhis member of boar Of directors in the com
sfyou know that:
1, He has granted on Y/7/2021 Periodical rais, 3
2, He received a loan from the Co. 50,0 with Pate
2021 ut return (interes
3. He was seconded for teaching Post -gra,
for rewards of LE 2809 annually,
. The company paid
1800
His share in social insu
Tax paid by employee
t) at first July
duate students at the faculty of business
p
Premium of his life fc
"
ance for the yea
c 2021 of LE 1480
during the year 2
021 amounted to LE 1264
*
Required, Prepare the settlement list at the end of the year of 2021
Note:
End of Year Adjustment Settlement List
If the tax paid during the year is:
> Lower than the tax due according to the settlement, the difference should be
collected
> More than the tax due according to the settlement, the difference should be
refunded
XT .
MESES ea Ca cL
SOLUTION
Seon
Tax base
Basic Sai
Regs nt (8200x6)(8500%6)
‘epresentation all, (3
We |. (300 x 12)
ork nature all, (150 x 12)
Foods cash all (50 x 12)
Special increment not added (300 x 12) 412,000
Amount of his member of board of directors (1000X 12) 41,400
Fringe benefit (Loan) goo |
Fringe benefit (Policies of insurance) a
Total taxable Revenues «|
Deduct from it
> Sums exempted by special laws 3600
Special increment added (300 x 12) ce
> Sums to meet actual expenses 9000
> Personal exemption | 1480_| _____
> Social insurance (24,080)
Total ee
———., 50,920
Net Annual Revenue See
Deducted:
> Life insurance
50,920 x 15% = 7,638
0
Fixed Sum -
fal paid Dial gb AL Jl RY (1800)
49,120
Taxable Net Revenue (Tax base) Tax settlement
||
A.Tax payable
Total Tax due
B.Tax actually paid during the year = 1,264
Tax differences must be payable = 2,493 - 1,264 = 1,229
a
Example Notes:
1- The fringe benefit related to the loan is calculated as follows:
‘Total amount through the last 6 months
Salary (3200 x 6)
Representation allowance (300x 6)
Work nature allowance (150 x 6)
Foods cash allowance (50 x 6)
Special increment not added (300 x 6)
Allowance of board Co (1000 x 6)
Total 30,000
50000 - 30,000 = 2,0000 x 7% = 1400
2- The rewards for L.E 2800 for teaching post-graduate students at the
faculty of commerce, subject to tax at the rate 10% without any deduction.
to meet costs as follows:
Tax due = 2800 x 10% = |.E 280
