Example (1):

An employee works in a private sector company receives the following amounts

monthly during year 2020 (Amounts in L.E):
1500 basic salary including the periodical raise, 350 nature of work allowance, and
monthly incentive of 75% from his basic salary.
The company deducts from his salary L.E 300 monthly social insurance
contributions.
Other data:
1. On first of July, the company raised his basic salary to L.E 2000, raised the nature
of work allowance to L.E 500, while the incentive remain at the same rate.
2. On first of July, he bought a car for his wife amounting to 120,000 paid half of
the price cash and the rest is for 50 monthly installments each for L. E 1500 to
be deducted from his salary.
3. On the same date, The company decided to give him and his family a free of
charge private flat (housing), the monthly rent for the flat was L.E 500, as well as
he was given a laptop to use in his work, its value was L.E 6,000.
4. On June 28, he pays L.E 50 monthly as a premium on a life insurance policy for
the benefit of his wife and his minor children.
5. The social insurance contributions deductions became of L.E 400 starting from
1/7/2020.
6. The company gave him L.E 15000 at the end of year as his annual profit share.
Required:
a. Calculate the monthly tax due on salaries and the like for year 2020.
b. Calculate the tax due on profit share.
 Sol.
Working:
As some changes have occurred in the monthly taxable items of this
employee, then we should differentiate between these changes
according to their date of occurrence.
Items From 1/1 to 30/6 From 1/7 to 31/12
* Basic salary + Periodical raise 1500 2000
* Nature of work allowance 350 500
*Incentive 75% (of basic salary + (75% × 1500) = 1125 (75% × 2000) = 1500
periodical raise)
* Social insurance contribution on basic 300 400
and variable salary
*Private flat (housing) for him and his
family is a for free in-kind taxable variable - 500
benefit for personal use
* Life insurance premium - 50
Remark:
• Any change in a taxable amount during the month will be shifted to the
beginning of the next month.
a. Calculation of monthly tax due for the period from 1/1 to 30/6
Items Amounts
1. Monthly taxable Basic Salary (+ periodical raise only) (2 items) 1500
(+) Add:
2. Monthly taxable variable salary : (up to 14 items)
• Nature of work allowance 350
• Incentive 1125
(-) Less:
3. Any monthly deductions as:
a. administrative penalty (0)
b. unpaid sick leave (unapproved) (0)
c. pension exchange (0)
= Total monthly basic and variable salary 2975
(-) Less:
4.
a. Personal Exemption (L.E 9000 ÷ 12 month = L.E 750 monthly) 750
b. Social insurance contributions (on basic and variable salary ) 300
(1050)
= Temporarily net monthly salary 1925
(-) Less:
5.
a. Contributions to private/special insurance funds 0
b. Life insurance Premiums
For the taxpayer or in favor of his wife or his minor children only 0
or any insurance premiums for pension entitlement
c. Health insurance contributions 0
We should compare between:
The actual total of (L.E 10000 ÷ 12) 15% ×Temporarily net
these 3 amounts monthly salary
(a + b + c) 15% × 1925
0√ L.E 833.3 288.75
The lowest amount of this comparison should be deducted √ (0) √
= Net monthly taxable income 1925
6. Convert the monthly income into annual income
Net annual taxable income from salaries and the like after all
deductions and personal exemption 23100
= Net monthly taxable income × 12
= 1925 × 12
(Shall be rounded to the nearest lowest 10 pounds)
(-) Less:
7. First bracket exemption (Minimum cost of living) (15000)
= Tax base 8100
 Tax Base = 8100
First Second Third Fourth Fifth Sixth Seventh
15000 15000 15000 15000 140000 200000 200000
8100 only
0% 2.5% 10% 15% 20% 22.5% 25%
Exempted
202.5

Then, The annual tax amount (due) = 202.5

Monthly tax due to be paid on salaries and the like (deducted at source by the employer)
from 1/1 to 30/6 (Jan., Feb., March, April, May and June)
= Annual tax amount ÷ 12 months
= 202.5 ÷ 12 months
= 16.875
 Calculation of monthly tax due for the period from 1/7 to 30/12
Items Amounts
1. Monthly taxable Basic Salary (+ periodical raise only) 2000
(+) Add:
2. Monthly taxable variable salary :
• Nature of work allowance 500
• Incentive 1500
• Housing (flat) 500
(-) Less:
3. Any monthly deductions as:
a. administrative penalty (0)
b. unpaid sick leave (0)
c. pension exchange (0)
= Total monthly basic and variable salary 4500
(-) Less:
4.
a. Personal Exemption (L.E 9000 ÷ 12 month = L.E 750 monthly) 750
b. Social insurance contributions (on basic and variable salary ) 400
(1150)
= Temporarily net monthly salary 3350
(-) Less:
5.
a. Contributions to private/special insurance funds -
b. Life insurance Premiums
For the taxpayer or in favor of his wife or his minor children only 50
or any insurance premiums for pension entitlement
c. Health insurance contributions -
We should compare between:
The actual total of (L.E 10000 ÷ 12) 15% ×Temporarily net
these 3 amounts monthly salary
(a + b + c) 15% × 3350
50 √ L.E 833.3 502.5
The lowest amount of this comparison should be deducted √ (50) √
= Net monthly taxable income 3300
6. Convert the monthly income into annual income
Net annual taxable income from salaries and the like after all 39600
deductions and personal exemption
= Net monthly taxable income × 12
= 3300 × 12
(Shall be rounded to the nearest lowest 10 pounds)
(-) Less:
7. First bracket exemption (Minimum cost of living) (15000)
= Tax base 24600
 Tax Base = 24600
First Second Third Fourth Fifth Sixth Seventh
15000 15000 15000 15000 140000 200000 200000
9600 only
0% 2.5% 10% 15% 20% 22.5% 25%
Exempted
375 960

Then, The annual tax amount (due) = 375 + 960 = 1335

Monthly tax due to be paid on salaries and the like (deducted at source by the employer)
from 1/7 to 31/12 (July, Aug., Sep., Oct., Nov. and Dec.)
= Annual tax amount ÷ 12 months
= 1335 ÷ 12 months
= 111.25
Remarks:
• Monthly installments for car are non-taxable as
they are use of salary.
• Laptop to be used in work is non-taxable.
• There is no due tax on employees’ profit share
(Non-taxable) as the company (as a legal person)
should pay the tax on its profits NOT THE
EMPLOYEES’ THEMSELVES (to avoid double
taxation).
Example (2):
An Egyptian employee works in a private sector company receives the following
monthly amounts during year 2018 (Amounts in L.E):
1000 basic salary, 300 overtime, 350 incentives, 250 nature of work allowance, 200
transportation allowance , 300 clothing allowance, 200 meal allowance and 500
housing allowance.
Other data:
1. He pays L.E 300 monthly as a premium on a life insurance policy for the benefit of his
wife and his minor children.
2. He also participated in a private insurance fund in his company for a monthly
contribution amounting to L.E 100.
3. On the 1st of March; he bought a refrigerator for his wife amounting to L.E 12,000 paid
half of the price cash and the rest is for 6 monthly installments each for L. E 1500 to
be deducted from his salary.
4. In April, he took a sick leave of 20 days but the company approved only 8 days and
deducted the other 12 days from his salary.
5. On July 1st, he was granted a monthly periodical raise of L.E 200 and a monthly social
raise of L.E 50. The company decided to raise the nature of work allowance to L.E 500.
Also, the company decided to give him and his family a free of charge flat with
estimated monthly rent L.E 300 and stopped the housing allowance.
6. On June 15, the company gave him a car to be used for both personal and business use;
its monthly operating cash costs L.E 600 and stopped the transportation allowance.
7. He paid 150 as his monthly Gym subscription.
8. On 1st of November he received L.E 20000 his share of
the profits distributed according to the law.
9. The company deducted monthly from his salary social
insurance contribution L.E 130 for the basic salary from
1/1 and L.E 170 from 1/7. Also deducted L.E 120 for the
variable salary from 1/1 and L.E 230 from 1/7.
10. He was delegated to teach in a private university for a
reward of L.E 4,000 monthly for a semester of 4 months.
Required:
a. Calculate the tax due for this employee for April and
December 2018.
b. Calculate the tax due on delegation bonus.
 Working:
Items 1/1 to 30/6 April 1/7 to 31/12
(Except April) (30 days) (December)
* Basic salary (+Periodical raise) 1000 1000 (same) 1200
* Overtime 300 300 (same) 300 (same)
* Incentives 350 350 (same) 350 (same)
* Nature of work allowance 250 250 (same) 500
* Life insurance premium 300 300 (same) 300 (same)
* Private insurance fund 100 100 (same) 100 (same)
*Unpaid sick leave (12 days) - (1000 × 12/30) -
= (Basic salary for April × 12/30 days) 400
* Private flat (housing) for him and his - - 300
family is a for free in-kind benefit for
personal use
* Car - - (600 × 20%) = 120
•Social insurance contribution on basic and 130 + 120 130 + 120 170 + 230
variable salary (same)
Remarks:
• As some changes have occurred in the monthly taxable items of
this employee, then we should differentiate between these
changes according to their date of occurrence.
• Transportation allowance is non-taxable.
• Clothing allowance is non-taxable.
• Meal allowance is non-taxable.
• Housing allowance is non-taxable.
• Monthly installments for refrigerator are non-taxable as they are
use of salary.
• As an unpaid sick leave occurred in April, then a separate
statement will be prepared for April.
• Social raise is non-taxable.
• Any change in a taxable amount during the month will be shifted
to the beginning of the next month.
• Monthly Gym subscription is non-taxable as it is a use of salary.
• There is no due tax on employees’ profit share (Non-taxable) as
the company (as a legal person) should pay the tax on its profits
NOT THE EMPLOYEES’ THEMSELVES (to avoid double taxation).
 a. Calculation of tax due for April
Items Amounts
1. Monthly taxable Basic Salary (+ periodical raise only) (2 items) 1000
(+) Add:
2. Monthly taxable variable salary : (up to 14 items)
• Overtime 300
• Incentives 350
• Nature of work allowance 250
(-) Less:
3. Any monthly deductions as:
a. administrative penalty (0)
b. unpaid sick leave (for the unapproved no. of days 12 days) (400)
c. pension exchange (0)
= Total monthly basic and variable salary 1500
(-) Less:
4.
a. Personal Exemption (L.E 9000 ÷ 12 month = L.E 750 monthly) 750
b. Social insurance contributions (on basic and variable salary ) 250
(1000)
= Temporarily net monthly salary 500
(-) Less:
5.
a. Contributions to private/special insurance funds 100
b. Life insurance Premiums
For the taxpayer or in favor of his wife or his minor childrenonly 300
or any insurance premiums for pension entitlement
c. Health insurance contributions 0
We should compare between:
The actual total of (L.E 10000 ÷ 12) 15% ×Temporarily net
these 3 amounts monthly salary
(a + b + c) 15% × 500
400 L.E 833.3 75 √
The lowest amount of this comparison should be deducted √ (75) √
= Net monthly taxable income 425
6. Convert the monthly income into annual income
Net annual taxable income from salaries and the like after all 5100
deductions and personal exemption
= Net monthly taxable income × 12
= 425 × 12
(Shall be rounded to the nearest lowest 10 pounds)
(-) Less:
7. First bracket exemption (Minimum cost of living) (15000)
= Tax base 0
 Tax Base = 0
First Second Third Fourth Fifth Sixth Seventh
15000 15000 15000 15000 140000 200000 200000
0% 2.5% 10% 15% 20% 22.5% 25%
Exempted

Then, The annual tax amount (due) = 0

Monthly tax due to be paid on salaries and the like (deducted at source by the employer)
For April = 0
 Calculation of tax due for December (1/7 to 31/12)
Items Amounts
1. Monthly taxable Basic Salary (+ periodical raise only) 1200
(+) Add:
2. Monthly taxable variable salary :
• Overtime 300
• Incentives 350
• Nature of work allowance 500
• Housing (flat) 300
• Car (600 × 20%) 120
(-) Less:
3. Any monthly deductions as:
a. administrative penalty (0)
b. unpaid sick leave (0)
c. pension exchange (0)
= Total monthly basic and variable salary 2770
(-) Less:
4.
a. Personal Exemption (L.E 9000 ÷ 12 month = L.E 750 monthly) 750
b. Social insurance contributions (on basic and variable salary ) 400
(1150)
= Temporarily net monthly salary 1620
(-) Less:
5.
a. Contributions to private/special insurance funds 100
b. Life insurance Premiums
For the taxpayer or in favor of his wife or his minor children only 300
or any insurance premiums for pension entitlement
c. Health insurance contributions 0
We should compare between:
The actual total of (L.E 10000 ÷ 12) 15% ×Temporarily net
these 3 amounts monthly salary
(a + b + c) 15% × 1620
400 L.E 833.3 243 √
The lowest amount of this comparison should be deducted √ (243) √
= Net monthly taxable income 1377
6. Convert the monthly income into annual income
Net annual taxable income from salaries and the like after all 16524
deductions and personal exemption ≈
= Net monthly taxable income × 12 16520
= 1377 × 12
(Shall be rounded to the nearest lowest 10 pounds)
(-) Less:
7. First bracket exemption (Minimum cost of living) (15000)
= Tax base 1520
 Tax Base = 1520
First Second Third Fourth Fifth Sixth Seventh
15000 15000 15000 15000 140000 200000 200000
1520 only
0% 2.5% 10% 15% 20% 22.5% 25%
Exempted
38

Then, The annual tax amount (due) = 38

Monthly tax due to be paid on salaries and the like (deducted at source by the employer)
For December
= Annual tax amount ÷ 12 months
= 38 ÷ 12 months
= 3.166
Remark:
• Original place of work: is the place at which the
employee performs work for more than 50% of his
time or from which he receives more than 50% of his
income during the fiscal period.
b. Tax due on delegation bonus from another place
rather than the original place of work
= 4000 × 4 months × 10%
= 1600
Important Remark: Salaries tax on income of non-
residents work in Egypt:
Income of a natural person
Resident Non-resident
(Egyptian or foreigner) (Egyptian or foreigner)
Income realized from Income realized from outside Income realized from inside
inside Egypt will be Egypt will be subjected to tax in Egypt only will be subjected to
subjected to tax in Egypt under the presence of the tax in Egypt.
Egypt without any following 2 conditions together:
condition. 1. The natural person has a
commercial or industrial or
professional activity in Egypt
(headquarter or head office).
2. The income realized outside
Egypt is resulting from
performing this commercial
or industrial or professional
activity abroad.
Social attachment Economic attachment
Non-resident workers in Egypt: As foreigners
resident in Egypt for a period = 183 days or
less continuously or intermittent within 12
months (A year) Considered to be non-
resident in Egypt.
Then, salaries and the like realized from inside
Egypt by those foreigners will be subjected to
a fixed flat proportional rate 10% without any
deductions or exemptions.
 Example (3):
An Egyptian private sector petroleum company
conducted an agreement with a foreign expert
to work in Egypt during year 2018, the terms of
this agreement state that:
1. Contract period is 3 months.
2. The expert shall receive in Egypt an amount of
L.E 250,000 during the contract’s period.
3. The company will pay the cost of his residence in
one of the Egyptian hotels for a total amount of
L.E 90,000.
Required:
Calculate the tax due on salaries and the like.
 Sol.
This expert is considered to be non-resident in
Egypt as he stayed here for a period of 3
months only (not more than 183 days within
a year), then salaries and the like realized
from Egypt by this expert will be subjected to
a fixed flat tax rate 10% without any
deductions or exemptions.
Total income = 250000 + 90000 (taxable in-kind free benefit for
personal use and not necessary for work) = 340000
Due tax on salaries and the like = 340000 × 10%
= 34000
 Remark:
Any in-kind benefit that is given to a non-resident
natural person in Egypt (As a private flat for the
employee and his family or a tablet for his personal
use) will be taxable in Egypt under the availability
of the following 2 conditions together:
1. It should be for free without any deduction from
salary,
2. It should be for personal use not necessary for
work.
 Example (4):
An Egyptian private sector company
conducted an agreement with a foreign
expert to work in Egypt during year 2018, the
terms of this agreement state that:
1. Contract period is 170 days
2. The expert shall receive in Egypt an amount
of L.E 90,000 during the contract’s period.
Required:
Calculate the tax due on salaries and the
like.
 Sol.
This expert is considered to be non-resident in
Egypt as he stayed here for a period of 170
days only (not more than 183 days within a
year), then salaries and the like realized from
Egypt by this expert will be subjected to a
fixed flat tax rate 10% without any
deductions or exemptions.
Total income = 90000
Due tax on salaries and the like = 90000 × 10%
= 9000
Remark:
• Amounts received by members of the diplomatic,
consular corps, international organizations (as:
United Nations UN and World Bank) and other
foreign representatives for their official work in
Egypt are exempted from tax on salaries and the
like in Egypt under condition of the extent of
reciprocity.
Example (5):
An American diplomatic who is working in the
American Embassy in Egypt, received the
following amounts during his residency in Egypt
for 200 days during year 2018:
1. The diplomatic shall receive in Egypt L.E 1,000
daily.
2. An amount of $100 will be daily transferred to
his account abroad.
Required:
Calculate the tax due on salaries and the like
for year 2018, noting that the exchange rate is
L.E 9 for $1.
 Remark:
• Amounts received by members of the diplomatic,
consular corps, international organizations and
other foreign representatives for their official work
in Egypt are exempted from tax on salaries and the
like in Egypt under condition of the extent of
reciprocity.
End of chapter (3)