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Tax
Accounting
24ACC09H

Tutorial 4:
Tax on Salaries and the Like
Tutorial Outline

• Quick recap on:

Tax on Salaries and the Like

• Solving practical problems

 Total Revenues (all amounts should be ANNUAL) L.E L.E
1. Basic Salary XX
Taxable Revenue 2. Variable Wages XX
3. Fringe Benefits XX
Total Annual Revenues XX
Deduct (exemptions)
Calculating 1. Sums exempted by special law xx

Tax base 2. Sums to meet actual expenses(to perform the work)

3. Personal Exemption
xx
20,000
4. Share of employee in social Insurance xx (xx)
Net annual revenues XX
5. Life and Medical Insurance premium xx
6. Share of workers in profits xx (xx)
Monthly tax due = Taxable net revenue( annual tax base) XX
annual tax base/12
 Taxable Revenue
Basic Salary Variable Wages Fringe Benefits

• The salary or wage • Rewards (except leaving service • Cars for personal use
prescribed in the contract reward) (20% of its cost is taxed).
+ any increments added • Incentives • Mobiles (20% of its cost
to it. • Commissions is taxed).
• Overtime wages and grants • Loans from the employer
• Allowances (7% of the loan amount
in excess over the value
• Share in profits for work
of the last 6 months paid
• Special Increments (not added to before by the employee)
the basic)
• Life Insurance paid by
• Social Increments the employer
• Share of workers from profits • Employee stock options
• Encouragement reward (only the difference
between market value
and amount invoiced is
taxed)
 Tax Exemptions
Employees’
Employees
Sums to meet subscriptions in
dividend
Sums exempted by actual expenses Personal Employee share in private insurance
distributed
Special Laws (collective in-kind Exemption social insurance funds, Life and
(Share of workers in
benefits) Medical Insurance
profits)
premiums
• All special • Meals offered to • EGP 20,000 Next slide • 15% of net revenue
increment (added + employees at (calculated by you)
not added) workplace or
• Social Increment • Collective • EGP10,000
• Representation transportation for whichever is less.
allowance employees whether
• University the vehicles are • Compare both with
allowance for owned or leased by the amount actually
government and the employer paid, and choose
public sector • Health care the lowest of the
employees only • Tools and clothing three.
necessary for
performing the The insurance company
work should be an Egyptian
• Accommodation company.
provided by an
employer for work
performance
Employee’s share in social insurance

➢ 11% on total monthly salary (incl. Basic and variable)

➢ The comprehensive insurance salary is defined to include all actual amounts received by the employee.
The New Law excludes from the definition of the comprehensive insurance salary certain types of allowances:
✓ Travel allowance
✓ Transportation allowance
✓ Meetings attendance allowance
✓ Uniform allowance
✓ Housing allowance
✓ Car allowance

However, the aggregate value of the excluded allowances shall not exceed 25% of the employee’s
comprehensive insurance salary.
The comprehensive insurance salary shall be subject to
the following minimum and maximum amounts:
Year Min Max
2020 1,000/month 7,000/month
The above minimum and maximum amounts will be increased 15% each year of the coming 7 years starting from
1st January 2021
2021 1,150/month 8,050/month
2022 1,400/month 9,400/month
2023 1,700/month 10,900/month
2024 1,955/month 12,535/month
2025 2,300/month 14,500/month
Problem 1
A governmental employee receives a monthly basic salary of EGP 6,200 (of which EGP 1,300 is a
special increment). He receives L.E 1,800 as work nature allowance, L.E 1,400 as representation
allowance, L.E 150 as social increment, L.E 600 as transport allowance to cover actual expenses,
and L.E 1,800 as a special increment not added to the basic salary.
Given that:

❖ He pays L.E 120 per month as a life insurance premium for his wife’s benefit.
❖ He also contributes L.E 70 per month to a special insurance fund.

Required: Calculate the taxable net revenues for 2023.

Answer
Calculation of Social Insurance L.E. L.E.
Total Salary:
Basic Salary 6,200
Work nature allowance 1,800
Representation Allowance 1400
Social increment 150
Special increment not added to the basic salary 1,800
Remember that the Total Salary 11,350
max. limit for 2023 Social insurance 10,900*11% 1199
is 10,900/month
 Total Revenues L.E L.E
1. Basic Salary (6,200*12) 74,400
2. Variable Wages
Work nature allowance (1,800*12) 21,600
Representation allowance (1400 *12) 16,800
Social increment (150*12) 1,800
Transport Allowance (600*2) 7,200
Special increment (not added to basic salary) (1,800*12) 21,600
Total Variable Wages 47,400
Total Revenue 121,800
Deductions
1. Sums exempted by special law
Special increment ((1,800+1,300)*12) 37,200
Social increment (150*12) 1,800
Representation allowance (1400 *12) 16,800 55,800
2. Sums to meet actual expenses(to perform the work)
Transport Allowance (600*2) 7,200 7,200
3. Personal Exemption 20,000
4. Share of employee in social Insurance (1331*12) 14,388 14,388
Total (97,388)
Net annual revenue 24,412
5. Private insurance, Life and Medical Insurance premium
15% of net revenue (15% * 24,412) 3,662
Fixed Sum 10,000
Lowest Actually paid ((120+70)*12) 2,280 (2,280)
Taxable net revenue 22,132
It is imposed at progressive rates for social justice (updated on January 2024):
Annual net Annual net Annual net
Annual net Annual net
Annual net income income income
Income income between income
income between between between
tax rate 800,000 to >1,200,000
< 600,000 600,000 to 700,000 to 900,000 to
900,000
700,000 800,000 1,200,000
0% From 1 to 40,000

From 40,000 to
10% 55,000
From 1 to 55,000

From 55,000 to From 55,000 to From 1 to

15% 70,000 70,000 70,000
From 70,000 to From 70,000 to From 70,000
20% 200,000 200,000 to 200,000
From 1 to 200,000

From 200,000 to From 200,000 to From 200,000 From 200,000 to

22.5% 400,000 400,000 to 400,000 400,000
From 1 to 400,000

More than More than From 1 to

25% More than 400,000
400,000 400,000
More than 400,000 More than 400,000
1,200,000
More than
27.5% 1,200,000
Determination of tax base: L.E
Salaries and the like 22,132
Tax due:
(40,000-0)*0% 0
Total Tax Due 0

The employee doesn’t pay taxes.

Problem 2
A public sector employee gets, during the year 2024, a monthly basic salary of L.E 8,000 ( L.E
2,000 of which is a special increment). In addition, he receives the following per month:
❖ L.E 600 as representation allowance
❖ L.E 1,000 as a work nature allowance
❖ L.E 500 as food allowance
❖ L.E 350 as transportation allowance
❖ L.E 1,500 as a special increment not added to the basic salary
❖ L.E 500 as social increment
Given that:
❖ He received an encouragement reward of L.E 14,000 in August 2024.
❖ He pays monthly L.E 1,000 as the life insurance premium of his life.

Required: Calculate the monthly tax due for 2024.

Answer
Calculation of Social Insurance L.E. L.E.
Total Salary:
Basic Salary 8,000
Representation Allowance 600
Work nature allowance 1,000
Food Allowance 500
Special increment not added to the basic salary 1,500
Remember that the Social increment 500
max. limit for 2024
is 12,535/month Total Salary 12,100
Social insurance 12,100*11% 1,331
Total Revenues L.E. L.E.
1. Basic Salary (8,000*12) 96,000
2. Variable Wages
Representation allowance (600 *12) 7,200
Work nature allowance (1,000*12) 12,000
Food Allowance (500*12) 6,000
Transportation Allowance (350*12) 4,200
Special increment (not added to basic salary) (1,500*12) 18,000
Social increment (500*12) 6,000
Encouragement reward 14,000
Total Variable Wages 67,400
3. Fringe Benefits --
Total Revenue 163,400
Deductions (exemptions)
1. Sums exempted by special law
Special increment ((1,500+2000)*12) 42,000
Social increment (500*12) 6,000
Representation allowance (600 *12) 7,200 55,200
2. Sums to meet actual expenses(to perform the work)
Food Allowance (500*12) 6,000
Transportation Allowance (350*12) 4,200 10,200
3. Personal Exemption 20,000
4. Share of employee in social Insurance (1331*12) 15,972 15,972
Total (101,372)
Net annual revenue 62,028
5. Life and Medical Insurance premium
15% of net revenue (15% * 62,028) 9,304 Lowest
Fixed Sum 10,000
Actually paid (1,000*12) 12,000 (9,304)
6. Share of workers in profits --
Taxable net revenue 52,724
It is imposed at progressive rates for social justice (updated on January 2024):
Annual net Annual net Annual net
Annual net Annual net
Annual net income income income
Income income between income
income between between between
tax rate 800,000 to >1,200,000
< 600,000 600,000 to 700,000 to 900,000 to
900,000
700,000 800,000 1,200,000
0% From 1 to 40,000

From 40,000 to
10% 55,000
From 1 to 55,000

From 55,000 to From 55,000 to From 1 to

15% 70,000 70,000 70,000
From 70,000 to From 70,000 to From 70,000
20% 200,000 200,000 to 200,000
From 1 to 200,000

From 200,000 to From 200,000 to From 200,000 From 200,000 to

22.5% 400,000 400,000 to 400,000 400,000
From 1 to 400,000

More than More than From 1 to

25% More than 400,000
400,000 400,000
More than 400,000 More than 400,000
1,200,000
More than
27.5% 1,200,000
Determination of tax base: L.E
Salaries and the like 52,724
Tax due:
(40,000-0)*0% 0
(52,724 – 40,000) *10% 1,272.38
Total Tax Due 1,272.38

The monthly tax due= EGP 1,273/12 = EGP 106