TAXACCOUNTI

NG
CONCEPTUALFRAMEWORKFORI
NCOMETAXONNATURALPERSONS
TAXDEFI
NITI
ON:
Taxisdefi
nedasbeingcashimposedandcol lect
edbythestatef
rom
i
ndiv
idualsandest
abli
shments(companies)inaccor
dancewi t
hcert
ain
det
erminedrul
eswiththeai
m ofcover
ing( f
inanci
ng)publ
icexpendi
tur
es
andachievi
ngeconomicandsocial
welfare.
TAXCHARACTERI
STI
CS:
1.Thet
axi
scompul
sor
yandnotopt
ional
accor
dingt
olaw
2.Amonet
aryobl
i
gat
ion.
3.Provi
debenef
it
stosociet
yingeneral
,therei
snodi
rectr
elat
ion
betweent
axpaidandtheserv
icesprovidedbyt
hegover
nment.
4.Theyarei
mposedaccor
dingt
olaws,
cancel
edandamendedi
n
accor
dancewi
ththel
aws.
5.Thestat
ehastheauthori
tytoimposeandcoll
ectthem f
rom
i
ndivi
dual
sandmaybedel egatedtoot
herstocoll
ectthetaxasi
sthe
casewhenthelocal
authori
ti
es
6.Thet
axi
simposedoni
ndi
vi
dual
s,whet
hernat
ural
orl
egal
.
7.Thet
axshal
lbeusedt
ofi
nancet
hegener
alexpendi
tur
eoft
heSt
ate.
8.Pai
dper
iodi
cal
l
yandt
her
ear
ecer
tai
ncasest
hatar
eexempt
edby
l
aw
9.Pai
dinafi
nalandi
rrev
ocabl
emannerev
eni
ntheev
entofasur
plus
i
nthest
atebudget
.

TAXPRI
NCI
PLES:
1.Cont
ri
but
etosuppor
tthegov
ernment
.
2.St
abi
l
ityoft
hev
alueofeacht
ax
3.Choosi
ngt
hebestwayt
ocol
l
ectt
ax
 4.Est
imat
ingt
hegener
alf
inanci
alsi
tuat
ionoft
hesoci
ety

TAXOBJECTI
VES:
Fi
nanci
alobj
ect
ives:
Taxi
sani
mpor
tantf
inanci
alr
esour
ce.
Economi
cobj
ect
ives:
Thet
axcont
ri
but
est
oachi
evi
ngeconomi
cbal
ance.(
Soci
alWel
far
e)
Soci
alobj
ect
ives:
Thet
axworkstostabi
li
zepubli
cincome,
whi
chcont
ri
but
est
osuppor
tpoor
fami
l
iesbypr
ovidi
ngthem subsi
dies

THEDI
FFERENCEBETWEENTAXESANDFEES:

Bot
ht axesandfeesaregover
nmentalfi
nanci
alinstr
umentsusedto
i
ncreasethepropor
ti
onofpubli
crevenuesbuttherearedi
ffer
ences
bet
weennat urecompulsor
ypaymentaccessseser v
icesandthepurpose
ofi
mposi t
ion
Thediff
erenceintermsofnature:Taxesareimposedonaper cent
age
basi
sinor dertor
aiser
evenueswhi l
et hei
mposi t
ionoffeesdependson
thei
rassociati
onwitht
heprovisionofacorrespondingserv
ice.
Thedif
fer
enceinter
msofcompulsorypay
mentthetasesar
emandat
ory
forpay
ment,whil
ethepay
mentoffeesisvol
unt
ary

THEDI
FFERENCEBETWEENTAXESANDFEES:
Thedifferenceintermsoftheservi
cesprov
idedindi
v i
dualsorenterpri
ses
generall
ycannotr ecei
veanyservi
cesorbenefi
tsinr
et ur
nf orpaymentof
thevalueoft hei
rtaseswhil
edir
ectpaymentofthefeespr ovidesaccessto
sever
al advantagesorservi
cesGovernmentalor
ganizati
ons
Thedif
fer
encei
nt er
msoft heobjecti
ve:Thefeesaregener
all
yimposedfor
thepur
poseofcontr
oll
ingorregulat
ingsever
al t
ypesofact
ivi
ti
esThetaxes
arei
mposedinordertoachiev
ethesocialwelfar
eandequali
ty

Ty
pesofTax
DI
RECTTAXES
Taxisconsi
dereddi
recti
fthepersonwhobear
si t
schargeorburdeni
sthe
onewhopay sthet
axonsal ar
iestaxoncommerci
alandindust
ri
al
act
ivi
ti
esetc.
Examplesar
eincometaxcorpor
ati
ont
axet
c.I
not
herwor
ddi
rectt
ax
reducest
heincomedi
rect
ly

I
NDI
RECTTAXES
Taxisconsideredindi
rectifitispossibl
etotr
ansferi
tsbur dentoanother
per
son, suchasthesal est
ax, inwhichthesel
lert
ransfersthetaxtothe
pur
chaseri ntheform ofani ncreasei
nthesalepr
iceofpr oducti
onandt he
sel
lerpayittotaxadmi ni
strationatfi
xedti
meandi nterv
als

QUALI
TATI
VEANDUNI
FIEDTAXES
Taxesareconsider
edasbeingqualitat
iveifi
mposedoneachki ndof
i
ncome( orexpenditur
e)asanindependenttaxsepar
atel
y,eitherinter
ms
ofrate,
provi
sions,
orcoll
ecti
onprocedures.Thetaxi
sconsi deredunif
iedi
f
i
tisimposedont otali
ncomes(orexpenditur
e)regar
dstheirsources,ata
uni
fiedrat
e.

PERSONALANDI
N-KI
NDTAXES
Per
sonalt
ax
Taxconsi
deredper
sonalifi
tconsi
der
stheper
sonal
cir
cumst
ancesoft
he
taxpay
erandall
owhim someexempti
ons.
Exampl
es:Exempt
ionsf
orf
ami
l
ychar
gessal
ari
est
axest
axoneof
commerci
al
I
nki
ndt
ax:
Ataxisconsi
deredi
nki ndift
hepersonal
cir
cumstancesofthet
axpayeri
s
nottakeni
ntoconsi
derati
onandisimposedhist
ori
calincomewi
thout
deducti
onofanyexpensefamilychar
ges
Exampl
e:Taxesonr
evenueder
ivedf
rom t
heowner
shi
pofcapi
tal
shar
es
bonsex
PROPORTI
ONALANDPROGRESSI
VE(
REGRESSI
VE)TAXES
Thepr oporti
onal r
atet axesar ethoseimposedataf i
xedr ateont het axabl
e
amount( thetaxbr acket)regar dl
essit
svalueExampl esofpr oportional
-
ratedtaxesar ethet axont hepr of
it
sofjuri
dical
persons.Thet axis
i
mposedataf ixedrateanamount i
ngto22.5%.Ont heot herhand,
progressi
v etaxesar etaxes, wherei
ntherateescal
at eswi t
hthei ncreasein
thetaxableamount .Ther atedecreaseswiththedecr easeinthet axable
amount
Anexampl
eofprogr
essiv
et axesi
sthetaxontheincomesofnatur
al
per
sonswher
eitisi
nposedaccordingtoaprogr
essiver
aterangi
ng
bet
ween10%andupt o22.5%ofthetaxabl
eamount

Cl
assi
fi
cat
ionoft
axesaccor
dingt
othei
rcol
lect
ionmet
hod
Taxesarealsoclassifiedaccordingt otheircoll
ectionmet hodintotaxes
paidbythetaxpay erdi r
ectl
ytothet axdepar tmentandt axesdeduct ed
fr
om theincomeoft het ax-
payeratsour cethatist hetaxwoul dber etained
fr
om sourcebyani nt ermediarybetweent het axpay erandt hetaxoffice,
whoi st
henobligatedt opayt hepr oceedsoft histaxtot hetaxoffi
ce
Examplesofthoset axespai ddirectlybythet ax-payertotheadmi ni
st rati
on
arethetaxonrevenuesofcommer cialandindust ri
alactiv
iti
es,andthet ax
onrevenuesofnon- commer ci
alprof essi
ons
Exampl
eofthet
axwhi
chi
sret
ainedatsour
cebyani
nter
medi
aryi
sthet
ax
onsal
ari
es

CLASSI
FICATI
ONOFTAXESACCORDI
NGTONATUREOFTAX:
Taxreturnoncapi
tal
ValueAddedTax(VAT)
Salestax
I
ncomet ax
Thecust omsdut
ytax
Propertytax
WealthTax

1.I
ncomeTax
I
ncomet axesinEgy ptdevel
opedthroughseveral
stagessince1939,I
n
1981, t
helawNo.157/ 1981(amendedbyt heLawNo.187/ 1993)made
fundament alchangesont heEgypti
anincometaxes.Thelaststagewas
throughpromul gat
edofl aw91/2005whi chwil
lbemostly
I
ncomeear
nedf
rom asour
cei
nEgy
pti
ncl
udest
hef
oll
owi
ng:
1.I
ncomef
rom ser
vicesr
ender
edi
nEgy
pt,
incl
udi
ngsal
ari
esandt
he
l
i
ke
2.I
ncomepai
dbyanempl
oyerr
esi
dingi
nEgy
pt,
eveni
fthewor
kis
per
for
medabr
oad
3.I
ncomeear
nedbyaspor
tsman,
oranar
ti
stf
oract
ivi
typer
for
medi
n
Egy
pt
4.I
ncomeearnedbyanon-r
esi
dentf
orwor
kunder
takent
hrougha
per
manentest
abl
ishmenti
nEgypt
5.Incomefr
om t
hedi
sposal
ofmov
abl
epr
oper
tyofaper
manent
establ
i
shmenti
nEgypt
6.I
ncomefrom t
heuseanddi
sposalofr
eal
est
ateandt
hel
i
cel
ocat
ed
i
nEgypt
,andannexedpr
oper
tyther
eof
7.Shar
edi
str
ibut
ionsofacor
por
ati
onr
esi
denti
nEgy
pt
 8.Di
vi
dendspai
dbyapar
tner
shi
presi
denti
nEgy
pt
9.Revenuepaidbythegovernment,l
ocalAut
hor
ityUni
ts,stat
e-owned
l
egalpersonsoranyresi
dentinEgypt,
andrevenuepai
dbya
permanentestabl
i
shmenti nEgy
ptevenifi
tsownerthereofi
nnot
resi
dentther
ein
10. Rentpay
ment s,l
i
censingfees,
androyal
ti
espaidbyaperson
resi
dinginEgyptorbyapermanentestabl
ishmenti
nEgyptevenif
t
heowneri snotresi
denttherei
n
11. I
ncomef
rom anyot
heract
ivi
tycar
ri
edouti
nEgy
pt

Asar esul
tofenact
mentoft heTaxLaw91f ort
heyear2005,andit
s
amendmentbyt hePresi
dential
Deci
sionNo.96fort
hey ear2015,
the
taxat
ionsyst
em inEgypthasbeentr
ansfor
med
Mai
nly
,fort
odayt
wot
ypesoft
axesappl
y
1.I
ndi
vi
dual
incomet
ax
2.Taxoncompanypr
ofi
t

Theincomeofnatur
alper
sonsresi
dinginEgy
ptissubj
ectt
oincomet ax
foratotal
peri
odof183daysi
ntheyear.Thefol
l
owingsour
cesofincome
aretaxabl
e:

I
ncomef
rom commer
cial
andi
ndust
ri
alact
ivi
ty
 Sal
ari
esandwages
I
ncomef
rom non-
commer
cial
act
ivi
ti
es
I
ncomer
eal
i
zedf
rom r
eal
est
atepr
oper
ty

NATURALPERSONSI
NDI
VIDUALI
NCOMETAXDEFI
NITI
ON
Natur
al PersonsI ndi
viduali
ncomet axisimposedont hetotalnetincome
oft
her esidentindivi
dualsforincomeear nedinEgypt,aswel l
ast he
i
ncomeear nedout si
deEgy ptforresidentindi
vidual
swhosecent erof
commer cial,
industri
al,orprof
essional acti
vi
ti
esisinEgy pt.Also,t
axi s
i
mposedont heincomeofnon- r
esidentindivi
dualsforthei
rincomeear ned
i
nEgy pt

Accordingt
oArt
icle(6)ofthel
aw,ananaltaxshallbeimposedonthetot
al
neti
ncomeofnat uralper
sona,r
esi
dent
,andnon- r
esident
,wit
hregardt
o
thei
rincomesr
ealizedinEgypt
.Thetot
alnetincomeshallbecomposed
Anannualtaxshal
lbei
mposedont het
otalneti
ncomeofr
esidentandnon
-
resi
dentnatur
alper
sonsi
nrespectoft
heiri
ncomesear
nedinEgy pt

Thet
otalneti
ncomecompr
isest
hef
oll
owi
ngsour
ces:
Sal
ari
esandt
hel
ike

Thi
st ypeoftaxesi srel
atedtother
emunerati
on,
wages, addi
tional
benef
it
s
andannuiti
esaf terthededucti
onofpensi
onandsocialinsur
ancedeposi
ts.
Theindivi
dual hastoeitherr
esidei
nEgyptorworkabroadonaccountof
ser
vicesprovidedf orEgypt
Commer
cialori
ndust
ri
alact
ivi
ty
Incomef rom commer cialandindustri
alacti
vit
yisat aximposedont heart
profitofthebusi nessgainedasar esul
tofanycommer cialori
ndust r
ial
activit
y.Mor eover,wear etalki
ngaboutthegai nsatt
ainedbybr okersand
agent saswel lasanyi ndivi
dual,agencyororganizati
onthatoper atesasa
broker ,
inter
medi arypartyoragentf oral
lthepossiblebusiness
transactionsrelatedtogoods, servi
cesandst ocks.Alsoincl
udedar ethe
profitsthatcomef r
om ther ealest
atedevelopmentandr estofpr operty

Pr
ofessi
onalornon-
commer
cialact
ivi
ty
I
ncaset
hear
easofpr
ofessi
onofani
ndi
vi
dual
arer
elat
edt
oanon-
commer ci
alfi
eld,t
hetaxonincomef rom non-commerci
alacti
vi
ti
esis
appl
ied.Thesetaxespert
ainforthetaxpayer
swor ki
ngabroadwit
hthe
maincenterofpracti
cebeinginEgypt

Realest
ate
Taxesonincomer eal
i
zedf
rom r
eal
est
atepr
oper
tyi
ncl
uder
etur
nsf
rom
uti
l
izat
ionoflandsandbui
l
dings

CHARACTERI
STI
CSOFTAXONNATURALPERSON'
SINCOME

Thetaxonnat
ural
per
son'
sincomei
mposedbyt
hel
aw91/
2005,
hast
he
fol
l
owing
char
act
eri
sti
c
Di
rectTax
Thet axonincomeofnat uralpersonsi nconsi der
edasbei ngoneoft he
dir
ecttaxesbecauset heper sonwhobear sit
schargesistheonewhopay s
i
t.Thispersoncannott ransferthischar get oanotherperson.I
tisalso
characteri
zedwithitsappl icabil
ityonlytonat uralper
sonsexclusiv
eof
corporateenti
ti
esonwhi chanot hertaxi simposed.Tot hiseff
ect,art
icl
e( 6)
oflaw91/ 2005stipulatest hat:"
Anannual taxist
obei mposedont hetotal
netincomeoft henat ural personsindicat edunderarti
cle(6)ofthi
sLaw"

AnAnnualTax
Thetaxoni ncomeofnat uralper sonsisanannualtaxther ef
oreiti
s
i
mposedont herevenuesreal i
zedbyt hetaxpayerduringonewhol ey
ear,
andbecomesduei naccordancewi ththecont
extofart i
cle(3)ofthel
awon
Januaryfi
rstofeachy ear
.Italsobecomesdueupont hedeat hofthetax
payeroruponexpiryofhisr esidenceinEgypt
I
tappl
iestot
hetotal
neti
ncomewhichthetax-
payerhasreal
izeddur
ing
t
heprevi
ousyear
.Thedeceaseoft
hetax-
payer
,ortheexpir
yor
discontinuanceofhi sresi
denceinEgyptisconsider
edasexcepti
onsfrom
theannui tyofthetaxRev enuesaredeter
minedonbasisoftheperiodf
rom
Januar yFirstunt
ildateofdeceaseordisconti
nuanceofresi
denceNoti
ng
thatthear ti
cleNo( 9)oftheexer
ti
v er
egulati
onsoftheLawpermitsthe
fi
scal peri
odcouldbemor eorl
essofoney ear.

Per
sonalTax
Thetaxont
heincomeofnatural
personsgrant
sthet
axpayeranexempti
on
tof
acethemini
mum l
imitofthecostofl
ivi
ngandfamil
ychargesLE7200

Adopt
ingt
hepr
inci
pleofsoci
alandeconomi
ccondi
ti
ons
Taxisimposedont hei
ncomeofnaturalper
sonsusual
l
yr esi
dent
sinEgy
pt
(social
condit
ion)andonthenon-r
esidentsi
nEgypti
nrelati
ontoi
ncome
real
izedinEgypt(economiccondi
ti
ons
Soci
alcondi
ti
ons
Taxappli
estotheincomeofnat ur
alpersonsusual l
yresi
dentsinEgypt
whetherEgypt
iansorforei
gner
sandonal lt
heirincomeswhet herr
eali
zed
i
nEgy ptorabr
oadat axpayeri
sconsideredresidingi
nEgy pti
f

 Resi
dinginEgyptf
oraperi
odexceedi
ng183day
scont
inuousor
i
nter
ruptedday
sdur i
ngf
iscal
year
 Egy
pti
sthemai
npl
aceofr
esi
dence
 Egypti
st hemaincenterofhi
sacti
vi
ty(
headoff
iceofmanaginghi
s
acti
vi
ty)Egyptisthecent
erofhi
scommerci
al,
indust
ri
aland
prof
essionalacti
vit
y.

Economi
ccondi
ti
ons
Taxi
simposedontheincomeofnatur
al per
sonsnotresi
dent
sinEgy
pt
whet
herEgypt
ianorf
oreigner
sonthei
rincomereal
izedinEgypt
Resi
dent
sandNon-
Resi
dent
sConcept
I
nappl
yi
ngtheEgypt
ianincometaxlaw,
anat
ural
per
soni
sanEgy
pti
an
r
esi
dent
,anyoft
hefoll
owingcases
1.I
fhav
ingper
manentr
esi
dencyi
nEgy
pt.
2.I
fresi
dingi
nEgyptformor
ethan183cont
inuousori
nter
mit
tentday
s
wi
thint
welvemonths
3.AnEgypti
anwor
kingabr
oad,
andr
ecei
vi
ngi
ncomef
rom anEgy
pti
an
tr
easur
y

TAXPERI
OD

Ataxperi
odi sthef
iscalyearbeginni
ngthef
ir
stofJanuar
yandendi
ngon
31stofDecembereachy ear,oranyperi
odoftwel
vemonthswhi
chisused
asabasef orcomputati
onoft hetax
Taxmaybecal cul
atedforaperi
odshort
erorlongert
hantwelvemonths.
Theexecuti
veregul
ati
onofthisshal
ldet
erminetheaccount
ingprocedur
es
forsuchper
iod
Taxbecomesdueont hedayfol
lowi
ngt heendofat axperi
od,andshal
l
alsobecomedueonthedeathofataxpayer,orcessati
onofataxpayer
's
resi
dency,ort
heper
manentdiscont
inuanceofat axpayerf
rom pr
act
ici
ng
theacti
vit
y
Taxmaybecal
culat
edf oraper
iodofl
essormor
ethant
wel
vemont
hsi
n
thef
oll
owi
ngcondit
ions:
1.Casesi
nwhi
cht
axmaybecal
cul
atedf
oraper
iodofl
esst
han12mont
h
thetaxpayer'
sfi
rstfi
nanci
alperi
od,whet
herthi
speri
odendsattheendof
thecalendaryearoranyotherdat
econsi
deredbythetaxpay
ert
obet he
endofhi sfi
nancial
year
Thedeat
hofthetaxpayerori
fhisr
esi
dencyi
nEgypthasbeeninterr
upt
ed,
orst
oppi
ngtheacti
vit
yordisposal
ofhi
sownershi
pofthefi
rm beforet
he
endofhi
sfi
nanci
aly
ear
Ift
het axpayerkeepsproperbooksandr
ecordsdur
ingoneofhisfi
nancial
years.Whent hetaxpayerchangest
heendofhisfi
nanci
alyear
,andinthis
case,thetaxiscalcul
atedfrom t
hebegi
nni
ngofthetaxyearbefor
ethe
changeandupt othedate
ofchange
2.Casesi
nwhicht
het
axmaybecal
cul
atedf
orat
axper
iodexceedi
ng
twel
vemonths
Inthefi
rstf
inancialy
earofalegalper
son,i
fthei
mplementat
ionoft
he
art
icl
esofincorporat
ionorcorpor
ati
oncontr
actr
esult
sinadelay
edclosi
ng
ofthebooks
I
nt heeventofachangeintheenddateofthef
inancialy
ear,ift
hedate
betweenthechangeandthebeginni
ngoftheoldfinanci
alyearisnotmore
thanthr
eemont hstheper
iodbetweenthebegi
nningoftheoldfinanci
al
yearandthestartdat
eofthenewtaxyearmaybeaddedt othefir
stnew
taxyear

TheTaxRet
urnsper
iodf
ornat
uralper
sons
Shallbesubmit
tedbef or
ethe1ofApri
lofeachy
earf
oll
owingt
heendof
fi
scalyearAndForlegalpersonbef
orethe1ofMayorwit
hinf
ourmont
hs
fol
lowingthef
iscal
y earenddate

TAXRATE
Thetaxrate,asprescri
bedinarti
cle(8)oflawno.91, i
sappl i
cable,
whether
forpr
ofi
tsaccr ui
ngfrom t
heactivi
tyt hr
oughoutawhol etaxperiod(12
months)
, orift
het axi
scalcul
atedf oraperiodofmor eorlessthan12
months,withoutanychangeinther ate,ei
therareducti
onorincrease,
orby
maki
ngachanget
othebr
ack
etspr
opor
ti
onat
etot
heper
iodofact
ivi
ty

The5%surt
axthatwasenact
edbyv i
rt
ueofLawno.53of2014hasbeen
abol
i
shedaft
erthei
ntr
oducti
onofLawno.96of2015.
Theabov e-
mentionedbracket
salsoapplytonon-r
esidentsonthei
ncome
theyrecei
vefrom anEgypti
antreasur
yoragainstworkperfor
medi nEgypt
.
Notethatbothresident
sandnon- r
esi
dentsareenti
tl
edt oanannualsal
ary
taxexemptionofEGP7, 000.
Thet axdueistobecal cul
atedatt
heratenotedforeachbr
acket
.Thet ax
credi
tshallappl
yonl yoncebasedonthehighestincomebr
acketforthe
taxpayer.Never
theless,f
orthoset
axpayer
swhosei ncomefal
lswithi
nthe
fi
fthbracket,
not axcredi
tistobeprovi
ded.
Theser
atesandcr
edi
tsar
eappl
ied
Forpay
rol
ltaxpayersstar
ti
ngthemonthfol
l
owi
ngt
hepubl
i
cat
ionoft
he
l
aneintheoffi
cialgazet
te(e,
Jul
y2017),
and
Forcommerci
al,
professi
onal,
non-commerci
al,
orrealest
atet
axpayer
s
star
ti
ngfr
om t
het axyearendsaft
erthepubl
i
cationofthel
awintheoffi
cial
gazett
e

TAXACCOUNTI
NG
Taxaccounti
ngcombinesaccounti
ngtechni
ques(gather
inginfor
mati
on,
processi
ng&recordi
ng)wi
thtaxregul
ati
onsandrulesforachievi
ngt
he
fol
lowingobj
ect
ives
1-Descri
besst
epst
hatmustbef
oll
owedt
odet
ermi
net
het
axpay
ers'
l
iabi
li
ty
2-Descri
besthedi
ffer
encebetweent
axabl
eincome(incomesubj
ect
totax)andtaxl
i
abil
it
yfort
axpayer
.(Taxl
iabi
li
tyt
axablei
ncome
taxrate)
3-Explai
nthedif
fer
encebet
weentaxabl
eincome(
incomesubj
ectt
o
tax)andaccount
ing(
fi
nanci
ali
ncome).
NOTETHAT
Taxabl
eincomeisdef
inedi
naccordancewi
thtaxr
egulat
ionsandr
ules,
whil
efi
nanciali
ncomeismeasur
edinaccor
dancewit
hGAAP

Sincetaxrai
nsdif
ferf
rom account
ingprinci
plesthi
sresulti
nthedi
ff
erence
betweentaxabl
eincomeandf i
nancial
incomef orexample.
Someveesincl
udedinthefinanci
ali
ncomear
eexcl
uded(
deduct
ed)i
n
det
ermi
ningthetaxabl
eincome
Someexpensesdeductedindetermini
ngfi
nancialoraccount
ingi
ncome
arenotdeduct
edindeter
miningtaxabl
eincome( Le)someexpensesar
e
consi
deredasexpensesaccordi
ngtoGAAP, howev er
,theyar
enot
consi
deredasexpenses
accordi
ngtotaxregulati
ons.Somededuct
ionsar
eallowedi
ndeter
mini
ng
taxabl
eincome;howev er
,theyar
econsi
deredasexpensesoncal
cul
ati
ng
accounti
ng(fi
nanci
al)income

PROCESSOFTAXACCOUNTI
NG

1.Measuri
ngthetaxabl
eincome:compari
ngther
evenuesubj
ectt
otaxand
expenses(
costa)accor
dingtot
axregul
ati
ons

2.Taxassessment:det
ermi
netheexempt
iont
obeexcl
udedf
rot
axabl
e
i
ncome( deduct
ingexempti
on)
.

3.Taxcoll
ecti
on:
thet
axmustbecol
l
ect
edf
rom t
het
axpay
eronspeci
fi
ed
datesaccor
dingt
othetaxLaw;
/

Uni
fi
edTaxonNon-
Commer
cialpr
ofessi
onpr
ofi
ts(
UTONCPP)
Thi
sty
peoft
axi
simposedON:

Netprof
itder
ivedfr
om f
reepr
ofessi
on&ot hernon-
commerci
al
pr
ofessi
onswhi chpr
act
icedi
ndependent
lybythetaxpay
ersuchas:
 Account
ant
s
 Lawy
ers.
 Doct
ors
 Dent
ist
s
 Phot
ogr
apher
 Jour
nal
i
stsMusi
cian
 Ar
chi
tect
s
 Engi
neer
s
 Thi
sty
peoft
axi
simposedont
henetpr
ofi
tmeasur
edoncashbasi
s
 Undercashbasi
s;Rev
enues&expensesar
erecor
dedonl
ywhen
recei
vedorpai
d.
Netpr
ofi
tRev
enue-Expenses:

NOTE:whenexpendit
urei
sforf
ixedassetthetaxpay
ershoul
drecov
er
t
hecostoftheassetbymeansofdepreci
ation.

Thiskindoftax;
isi
mposedonnetprof
itwhichi
sreal
i
zedinEgyptori
fiti
s
real
izedout
sideEgy
ptt
hetaxpayermainplacei
nwhichheexer
ciseshi
s
acti
vityi
nEgypt
B)Det
ermi
ningoft
axabl
enetr
evenue:
Netrev
enueofNon-
commer
cialpr
ofessi
onwhi
chi
ssuppor
tedr
egul
ar
books:
1-
Taxabl
erev
enue

A)Rev
enuesder
ivedf
rom pr
act
ici
ngapr
ofessi
on
Taxisimposedonr ev enuesfrom all
var
ioustypesofoper at
ionsrel
atedto
theprofessi
onaccor dingt othecashbasis(t
heamountr eceivedactual
ly)
.
So,anyr ev
enuer ecei
v edinadv ancewil
lbesubjectedtotax,buti
fwedone
awor kbutwedi dn'treceiveanymoney ,soi
twi l
lnotincl
udei nt
hetable
revenueasi ti
snotcol lect
ed.
EXAMPLE
*Rev
enuesofanaccountanti
ncl
udefeesofaudi
ti
ng,
prepar
ingt
axr
etur
n,
desi
gnaccount
ingsyst
em &others.
*Revenuesofphysici
anincludefeesofsurgi
cal
oper
ati
ons,
medi
cal
examinati
on,medicalconsult
ati
on&ot her
s.

Capi
talGai
ns
Meansthatt
hosegai
nsresul
ti
ngf
rom sal
eofanyoft
hef
ixedasset
sused
i
npract
ici
ngthepr
ofessi
on
Capi
tal
gai
nSal
epr
ice>BookVal
ue(
Cost
-A/
D)

Ret
urnf
ort
ransf
erofexper
ti
se,
assi
gnment
,orcl
osur
e

Taxisimposedonreturnfort
ransferofexper
tiseorassi
gnmentofthe
placeofpr
acti
cetheprofessi
on,ital
soimposedonamountcol l
ect
edasa
resul
tofcl
osureofof
f i
cesorplacesofpracti
cesoftheprof
essi
on
Extheamountpai
dforsal
eoruseofi
ntel
l
ect
ual
proper
tyr
ight
sas
copyr
ight
Exr
evenuef
rom l
easi
ngofcl
i
nicwi
thi
tsequi
pment
.
I
mpor
tantnot
es:
Thi
ski
ndofr
evenueswi
l
lnotbei
ncl
udedi
ntaxabl
erev
enues:
-

1-Monet
arypr
izes(
lot
ter
yrecei
ved)
.
2-Recei
vedamountf
rom aTVspeech.
3-St
atei
ncent
ives&bonuses
4-Monetar
ypri
zesfr
om publi
shi
ngar
esear
chorasci
ent
if
icbookor
t
ransl
atesci
ent
if
icbook.
5-Rev
enuer
ecei
vedf
rom pr
act
ici
ngwor
kout
sideEgy
pt.

Deduct
ibl
ecost
s:

-
Deducti
onsareexpensest
hatar
eappr
ovedbyt
axof
fi
cet
obededuct
ed
f
rom t
herevenue.

-Cost
s&expensesar
ededuct
ibl
efr
om t
axabl
erev
enueswi
tht
hef
oll
owi
ng
condi
ti
ons
1-Thet
axpay
ershoul
dkeepr
egul
arbooksofaccount
ing
2-Theymustbenecessaryfort
hepract
iceoft
hepr
ofessi
onort
he
act
ivi
ty(
notper
sonalexpenses)
.
3-Theyshoul
dber
eal
,thusi
mput
edexpensesar
enotdeduct
ibl
e.
4-Theyshoul
dhav
ebeenact
ual
l
ypai
dexceptdepr
eci
ati
onexpenseof
fi
xedasset
s
5-Theyshouldbesupport
edbydocuments;however,
theyar
e
deducti
blebutmustnotexceed7%oft
otalgeneral
&administ
rat
ive
expensessuppor
tedwithdocument
s.
Exampl
eoft
heseexpenses:
 Gr
atui
ti
es(
ti
ps)
.
 Ordi
nary&sy
ndi
cat
efi
scal
stampsr
equi
redf
orr
unni
ngt
hewor
kof
t
hefirm
I
nter
nal
trav
elexpenseCl
eani
ngexpenses
 Ref
reshment
s(buf
fet
)expenses
 Or
dinar
ymai
ntenanceexpenses
 Dai
l
ynewspaper
s&magazi
nes
 Ent
ert
ainmentexpenses

Deduct
ibl
ecostbyl
aw
 Dut
iesofr
egi
str
ati
on
 Annual
subscr
ipt
ionpai
dtosy
ndi
cat
e
 Dut
iesofpr
act
ici
ngpr
ofessi
on
 Depr
eci
ati
onoff
ixedasset
susedi
npr
act
ici
ngt
hepr
ofessi
onsuch
asmachi
nes,
fur
nitur
e,i
nst
rument
s&t
ool
s.
 Taxespai
dforpr
act
ici
ngt
heprof
ession(ex:bui
ldi
ngtaxonpl
aces
ownedbytaxpay&usedi
npr
acti
cingtheprofessi
on)

2-
Otherdeduct
ibl
ecost
snecessar
yforpr
act
ici
ngpr
ofessi
on
1-Rentofpl
aceorpl
acesal
l
ocat
edf
orpr
act
ici
ngpr
ofessi
onoract
ivi
ty.
 2-Costofsci
ent
if
icbooks,
jour
nal
sdeper
iodi
cal
s.
3-Otherexpenses,
elect
ri
cit
y,water,t
elephones,tel
egr
aph,pr
inted
st
ationer
y&subscr i
pti
onstoscienti
fic&professi
onalsoci
eti
es.
4-Tr
avel&transpor
tat
ionexpensespai
dbyt
axpay
erf
orpr
act
ici
ngt
he
pr
ofessi
on
5-Capi
tal
Lossesar
ededuct
ibl
eonl
yift
axpay
erkeepsr
egul
arbook
s
6-Wages,
salar
ies,
&r ewar
dsofwor
kingf
orcewhom t
axpay
erempl
oys
i
npract
ici
ngprofessi
onwhet
her
,

 Cashwages
I
nki
ndwages
 Hi
sshar
einsoci
ali
nsur
ance

(
Ift
axpayeremploysamemberofhi
sfami
l
y,t
hei
rwagesmustbewi
thi
n
t
heli
mitotheequiv
alent
s).
7-Jointexpensessuchas;
carexpenses,
tel
ephoneexpenses,
80%of
thoseexpensesarall
owedtobededucted.
8-I
nsur
ancepr
emi
um agai
nstpr
ofessi
onal
risk

C)Somededuct
ibl
esf
rom netr
evenue

(1)Pr
ivat
epensionfundssubscr
ipt
ionpai
dbythepr
ofessi
onal
stot
he
syndi
cateinor
dertofinancet
hei
rownpension
(
2)Lif
e&medicali
nsur
ancepremiumspai
dbyt
hepr
ofessi
onal
tof
avorof
t
hetaxpahi
swife&hisminorchi
l
dren.

NOTE:
Bot
hpr
ivat
epensi
onf
undssubscr
ipt
ion&l
i
fe&medi
cal
insur
ance
pr
emi
umsar
eexempt
edf
rom t
axunder2condi
ti
ons:
1-Notexceedl
i
mitofLE3000
2-Subscr
ipt
ion&insurancepr
emiumsarenotdeduct
edfr
om anyot
her
rev
enuewhichsubjecttoi
ncometaxofnat
uralper
sons