Book - Tax 2 PDF

Misr University For science & Technology
College of Business & Economic

Department of Accounting
. The Commercial and Industrial Activities Tax

on Juridical (Legal) Persons.
. Value added tax
Dr. Ghada Nabil Massoud

Associate Professor
Head of accounting department
Vice dean for students and education
2019-2020
Book Title: TAX ACCOUNTING (PART 2)
Author's Name Dr. Ghada Nabil Massoud
Size: 17 x 24
Number of Pages : 220
Dep. No 17014/2018
All rights reserved. No part of this book may be reproduced in any

form, mimeograph or any other means, without permission in writing
from the Doctor/ Ghada Nabil Massoud
Contents
Page
Preface ............................................................................ 5
Chapter One : Introduction : classification of taxes 7
Chapter Two : The commercial and industrial

activity tax on juridical(legal)
persons .................................................. 15
Chapter Three : Value added tax ................................. 97
3
4
Preface
The current Egyptian tax system consists of two main groups of

taxes, direct taxes on income and indirect taxes.
We have studied in part (1) the direct tax on natural
persons.
In part (2) we shall study different tax on juridical (legal)
persons. And also we shall study the indirect tax.
The indirect tax is characterized by achieving regular
source of income to the public treasury all over the year around,
as it is imposed on all different incomes, also it is flexible source
as it is affected by the economic changes. This tax considers
suitable to the tax payer, as it is easily collected.
Thus this text is to be classified into three chapters as
follows:
 Chapter One: Introduction: classification of taxes.
 Chapter Two: The commercial and industrial activity tax on
juridical (legal) persons.
 Chapter Three: The value added tax (Indirect tax).
5
6
Chapter One : Introduction Classification of taxes
Introduction
Classification of taxes
7
8
Tax is defined as being a cash levy collected by the state from

individuals and establishments in accordance with determined
rules with the aim of financing public expenditure and achieving
economic and social welfare.
From this definition, it ensures that a tax is:
1) A levy: because it is imposed and collected by the state.
2) Cash: Paid in cash and payment thereof may not effected in
the form of personal services or in- kind services.
3) Paid to the state: because it is paid to the state under
strength of its sovereignty. Its income is used to finance
general expenditure, to achieve economic and social welfare.
Distinction between major types of taxes:
- Direct and indirect tax.
- Qualitative and unified taxes.
- Personal and in-kind taxes.
- Proportional and progressive taxes.
- Taxes paid by the payer directly and taxes deducted from
the income of the tax-payer at source.
9
Direct and indirect taxes:

Taxes can be divided into two groups, direct and indirect taxes.
Tax is considered is being direct if the person who bears its
charges, is the one who paid the tax. Thus, income tax is
considered as direct taxes. For example, the tax on salaries,
tax on revenues of commercial and industrial activities, tax
on revenues on non-commercial professions and tax on
real state revenues, as was studied previously in part(1).
On the other hand, tax is considered indirect, if it is possible to
transfer its burden to another person, thus taxes on
expenditures are indirect taxes. An example of indirect tax:
custom duties, proportional stamp tax and value added tax
which we shall study it in this book.
Qualitative and unified taxes:
Tax may be qualitative or unified. Taxes are considered as being
qualitative if imposed on each kind of income or
expenditure as an independent tax separately, either in
terms of rate, provisions, or collection procedures. The tax
is considered unified if it is imposed on total incomes or
expenditures regard their sources, at a unified rate.
10
Personal and in-kind taxes:

Taxes may be personal taxes or in-kind taxes. The tax is
considered personal if it considered the respective tax-
payers payment capability and allow him some exemptions
such as the cost of minimum living limit exemptions, and
family charge exemptions.
Examples of personal taxes are: salaries tax, tax on revenues of
commercial and industrial activities and tax on revenues of
non-commercial professions.
In other word, when we determine the ability of the tax payer to
pay the tax, we can take personal or social consideration,
in order to impose the tax.
The tax is considered as in-kind tax, if the tax payer personal
conditions are not taken into consideration and it is
imposed on his total income , regardless the cost of
minimum living limit, the tax-payer social condition or any
expenses incurred by the tax-payer towards earning those
revenues. As an example of the in-kind taxes, Value added
tax, custom duties and proportional tax.
Proportional and progressive taxes:
In terms of rates, taxes are divided into proportional taxes and
progressive taxes. The proportional –rate taxes are those
11
imposed at a fixed rate on the taxable amount (the tax

bracket) regardless its values, examples of proportional –
rated taxes are the tax on the profits of juridical person.
The tax is imposed at a fixed rate amounting to 22.5%. On
the other hand, progressive taxes, are taxes wherein the
rate increases with the increase in the taxable amount. The
rate decreases with the decrease in the taxable amount. An
example of the progressive taxes, is the tax on the incomes
of natural persons, where it is imposed according to a
progressive rate ranging between 10% – 22.5% of the
taxable amount, which we have been previously studied in
part (1).
Classification of taxes according to their collection method:
Taxes are also classified according to either collection method,
into taxes paid by the tax-payer directly to the tax
department and taxes deducted from the income of a tax-
payer at source, that is the tax retained from source by an
intermediary between the tax-payer and the tax
administration, who is then obligated to pay the proceeds
of these tax to the tax administration.
Examples: of those taxes paid directly by the tax-payer to the
administration are the tax on revenues of commercial and
industrial activities, and the tax on revenues of non-
12
commercial professions.
Examples: of the tax which is retained at source by and

intermediary is the value added tax.
13
14
Chapter Two: The Commercial and Industrial Activities Tax on Juridical
(Legal) Persons
The Commercial and Industrial

Activities Tax on Juridical
(Legal) Persons
15
(Legal) Persons
16
(Legal) Persons
Introduction:
The present tax law has considered the partnerships as
juridical persons equal to the corporation (joint stock, limited
joint stock, and limited companies). All considered as a juridical
persons exactly as the case for the partnerships whereas the
company's profit is taxable not the partner (s).
In its book three, of the law contained the provision of this
tax in article from (47) to (55) of law (91) for 2005.
This will be explained in the following items:
First: characteristics of this tax:

[1] It is an in – kind tax.
[2] It is a direct tax imposed on earned profits.
[3] It is imposed on legal (juridical) persons
[4] It is imposed on net profits.
Second: scope of tax:

According to article (47) “an annual tax shall be imposed
on total net profits of juridical persons whatever their purposes.
The tax shall apply to:

[5] Juridical persons resident in Egypt, with regard to all
profits they realized whether from Egypt or from abroad.
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(Legal) Persons
[6] Juridical persons nonresident in Egypt with regard to the

profits they realized through a permanent establishment in
Egypt.
Anyhow according to article (48) of the tax law, the following
shall be considered juridical persons:
 Corporations and partnership whatever the law they are
subject.
 Co-operative societies and their unions.
 General authorities and other public juridical persons
concerning his taxable activity.
[7] Foreign banks, companies and establishments, even if their
head offices are abroad and their branches in Egypt.
[8] The units established by local administration with regard to
the taxable activity they exercise.
Third: Tax Base:

In The article (51) of the tax law points out that the tax
base of juridical persons should follows the provisions applicable
to the profits from commercial and industrial activities of natural
persons, as revenues of both of them stem from the same
source(i.e. capital and labor together).
Article (51) states that "the net taxable income shall be
determined according to the provision applicable to the profits of
18
(Legal) Persons
the commercial and industrial activity, prescribed in Book (2)

Part (3) of the present law, where no special provision is
prescribed in this part".
Anyhow, you have to refer to what is explained before on
discussing commercial and industrial activities whether for
taxable revenues or for deductible costs.
In other words. Taxable Revenues include for Example:

a) Revenues resulting from normal activity, or what is
known as “gross profit”.
b) Casual or irrepeatative revenues, including :
(1) Discount received.
(2) Collected bad debts.
(3) Subsidies, grant, donation and the like.
(4) Collected commissions.
(5) Collected compensations.
(6) Investments revenues.
(7) Bonds issuance premium.
(8) Excess of issuance fees than expenses ….etc.
c) Capital gains : resulting from selling fixed assets as for
deductible cost, you have to remember what is
previously mentioned concerning for example :
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(Legal) Persons
(1) Rent.
(2) Normal depreciations of fixed assets, in addition
to the accelerated depreciations of the cost of
machinery and equipment's at the rate of 30%.
(3) Paid donations and charities to governmental
bodies or recognized charitable societies
(4) Social insurance premiums
(5) Amounts deducted annually for the account of
special funds which should not exceed 20% of the
total salaries and wages.
(6) Salaries (and the like) to employees.
(7) Advertising and promotions expenses.
(8) Fines, compensations and legal expenses.
(9) Bad debts.
(10) General and administrative expenses.
(11) Debit interests.
According to article (52) of the tax law, the following
should not be considered as deductible costs:
1. The debit interests paid by the juridical persons on the
loans and advances obtained by them in excess of four
folds the property rights average according to the financial
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(Legal) Persons
statement.
2. Amounts set aside toward forming or feeding all kinds of
previsions with the exception of the following :
d) 80% of the loans provisions which the banks are
committed to from according to the rules of preparing
financial statements.
e) The technical provisions which the insurance
companies are committed.
3. The profit share and distributed dividends, and the
attendance fees paid to the shareholders for attending the
general assembly's meeting.
4. Membership remuneration and allowances obtained by the
chairmen and members of the board of directors.
5. Laborers share in profits to be distributed according to the
law.
6. The other costs prescribed in article (24) of the present
law.
Fourth: Tax exemptions:
1. The ministries and governments departments.
2. The educational establishments which are primarily non-
profit seeking.
3. Non- governmental organizations established according to
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(Legal) Persons
the provisions of the non- governmental organizations law

as promulgated by law no (84) for 2002, within the limits
of the purpose for which they are established.
4. Non- profit seeking entities that exercising activities of
social, scientific, sporting or cultural nature within the
limits of the activity exercised by them with no
commercial, industrial or professional quality.
5. Profits of special insurance funds that are subject to the
provisions of law (54) for 1975.
6. The international organizations, technical co –operative
authorities and their representatives; the exemption of
which is provided for by an international convention.
7. Profits and dividends of the investment funds established
according to the capital market law as promulgated by law
no 95 for 1992 and the interests of bonds that are listed in
the official tables of the stock of exchange.
8. Income from dealing as obtained by resident juridical
persons from their investment in securities listed in the
Egyptian stock exchange alone with non- deducting the
losses resulting from that dealings or carrying them
forwards to following years.
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(Legal) Persons
9. They yields obtained by the juridical persons on securities

(and certificates of deposit) issued by the central bank of
Egypt or the revenues resulting from dealing in them, in
exception to the provision of article 56 of the present law.
10. Dividends, profits and shares obtained by resident juridical
persons against their contributions to other resident
juridical persons.
11. Profits of land reclamation or cultivation companies for a
period of 10 years from the date or starting of the exercise
of the activity or beginning the production, according to
each case, according to the rules to be determine in the
executive regulations of the present law.
12. Profits of poultry production, bees breading, cattle
breading and fattening pens companies and fisheries
companies for a period of 10 years from the date of
beginning the exercise of activity.
Fifth: Tax rate:

This tax rate is 22.5%
"The taxable base shall be rounded up to the nearest less
ten pounds and shall be subject to the tax at the rate of 20% of
the annual net profits.
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(Legal) Persons
In exception to the rate mentioned in the profits of Suez

Canal authority, the Egyptian petroleum authority and the central
bank shall be taxable at a rate of 40%. The profits of oil and gas
exploration and production companies shall also be taxable at a
rate of 40.55%.
Sixth: Some Important Procedures:

At the end of this chapter we have to point out -briefly-
some of the most important procedures concerning tax on
incomes of juridical persons as stated in law (91) for 2005, as
follows:
1. Persons liable to taxation (whether natural or juridical)
have to submit to tax department a notification - within 30
days from the date of beginning the exercise of activity -
(article 74) Legal representatives of juridical persons are
responsible for this notification.
2. The taxpayers (whether natural persons -according to some
conditions - or juridical persons (in all cases) should keep
the books and registers necessary for operations, and also
the documents in support thereof at head office of the
business for 5 years at least (or 6 years for taxpayer who
evades the tax payment. (Articles 78 and 91).
Notice that article (100) obliged "the educational establishments
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(Legal) Persons
and institutions, and the organizations and establishments

exempted from the tax prescribed in the present law shall submit
to the administration's law officers, upon e ach demand, their
account books and all documents they are required to submit."
3. Tax declaration (or Return) shall be submitted to tax
department within the following date :
"before the first of way of each year or within four months
following the fiscal year end d ate with regard to the juridical
persons" (Article 83).
4. In some cases, the tax department may appoint delegates
for it from among its officers at the ministries,
governmental administrations, local administration units,
public juridical persons, public sector companies and
public business sector companies, in order to follow-up the
sound implementation of tax laws and the ascertainment of
taxes settlement. (Article 128).
Determining taxable revenues:

The accounting profits refer to the result of matching
revenues against expenses in the income statement, where both
revenues and expenses are measured in accordance with the
generally accepted accounting principles or the Egyptian
Accounting Standards.
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(Legal) Persons
On the other hand, the taxable profit is measured in

accordance with the tax laws, tax regulations and the instructions
of the Egyptian Tax Authority which state the bases for
calculating of annual incomes and annual expenses.
Therefore, the accounting profit and the taxable profit will
never agree due to the differences in viewing the revenues and
expenses of a business firm, thus, the accounting profit as per the
income statement has to be adjusted in order to comply with the
tax laws.
According to Article No. (17) of the Tax Law, it is
stipulated that taxation is imposed on the "net profits....". Article
No. (22) has also stipulated that tax is to be determined annually
on the basis of net profit during the preceding year, or the period
of the twelve months the result of which was considered as basis
for preparing the last balance sheet as the case may be; and it
stipulates that the taxable net profit is determined on the basis of
the result or outcome of transaction, or the operations of different
kinds and sorts, in accordance with the provisions of this law.
But the accounting profit figure may not always be the
same as the tax bracket for several reasons therefore, it is
necessary to perform an adjustment of the accounting profit
figure which is affected in the tax declaration of the taxpayer.
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(Legal) Persons
The difference between of the accounting net profit (ANP)

and the taxable net profit (TNP) may exist for one the following
reasons.
i. Some Accounting revenues may be exempted from
taxation, such as returns on securities unrelated to
performing the firm's activity.
ii. Some taxable revenues are not considered on determining
the accounting profits, such as the revaluation gains
resulting from assets or liabilities.
iii. Some accounting expenses, considered on determining the
accounting profits, are not approved by the tax law, such
as reserves made for probable losses and life insurance
premiums on employees.
iv. Some expenses are not considered on determining the
accounting profits but approved by the tax, such as the
a. rental value of building owned by the firm in which
it
b. operates.
To determining the taxable net profit (TNP), the
accounting net profit (ANP) is adjusted as follows:
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(Legal) Persons
Accounting net profit (ANP), as it appears in the

income statement XX
Add:
Accounting expenses not approved by the tax
department + XX
Taxable revenues not considered on determining ANP + XX
Deduct:
Tax approved expenses not considered on determining
ANP - XX
Accounting revenues exempted by the tax law - XX
Taxable Net Profit (TNP) XX
In the following section, a detailed discussion will be made
on the tax treatment of each item of revenues and expenses.
First: Revenues:
The following conditions must be satisfied in order to levy
tax on revenues:
a) All revenues must be realized and be real not paper profits
like profits on revaluation.
b) They related to the business, not owners.
c) They related to the period under taxation, usually accrual
basis of accounting is applied in commercial and industrial
firms.
28
(Legal) Persons
The Most important kinds of revenues which appear in

financial statement are as follows:
Sales:
Sales revenue represents the most important kinds of the
firm's revenues. Sales revenue is exposed to several factors
which may show it contrary to its nature on a plus or minus basis.
Consequently, it may affect the accounting on the net profit so
that it would be realistic.
The firm may follow some approaches to show the sales
figure as less than and some factors may inflate the sales figure,
and show it higher than that what it should be. The following are
some of these approaches:
Example:
Assume that the income statement of a general partnership
in Cairo has shown a net profit before taxes L.E.700000. On
examining the books & records of the company the tax
commissioner found out the following:
1. Two sales invoice amounting to L.E.160000 were not
recorded in the sales journal.
2. Sales to a related-party, which is a cousin of a partner,
amounted to LE.85000 but their normal value is
LE.100000.
3. Purchases overstated by a double recording of a purchase
29
(Legal) Persons
invoice of L.E.18500.
4. Drawings of goods by a partner the cost price 12000 and
the selling price of the goods it is L.E.16000 the
withdrawal/s were not recorded.
5. The inventory at end includes goods received on
consignment LE.20000.
6. Discounted allowed to customers L.E.1800 was not
recorded in the books.
Required:
Make out adjustments to the accounting profits to find out
the taxable profit Compute the tax due.
30
(Legal) Persons
Solution:
The Tax Return for the partnership
Net profits as per income statement 700000
+ Additions :
Sales invoices
The omission has reduced sales revenue
and net taxable income, so their amount
is added to taxable income 160000
Difference of sales to related-party
Sales to related-party must be at normal
or fair price, so, the difference which is
100000-85000=LE.15000 is added to
taxable income. 15000
Double recording of purchase invoice
The double recording of the purchase
invoice has increased cost of purchases,
cost of goods available for sale, and cost
of goods sold; consequently, it has
reduced net profits, so it is added to
taxable income. 18500
Partner's drawings
Drawings should be recorded at sale
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(Legal) Persons
price, thus L.E. 16000 is added to taxable

income. 16000
Total additions 209500
Deductions :
Goods received on consignment
These goods must not be included in cost
of inventory at end, thus, it is excluded
from taxable income. 20000
Discount allowed not recorded
The discount allowed not recorded by the
firm is deducted as it is admitted by the
Tax Department. 1800
Total deductions (21800)
Net Taxable income 887700
The tax due for the financial year ending
= L.E. 887700  22.5%=L.E. 199732.5
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(Legal) Persons
Capital Profits:
Capital profits are resulted from one of the following sources:
 Profits resulting from liquidation of assets, whether by sale
or compensation.
 Profits resulting from revaluation of assets at a value
exceeding their book value.
Each of these sources differs as to the extent to which it
may be subjected to taxation. We are going to discuss each
source separately as follows:
(A) Profit on Liquidation of Capital Assets:

The tax department views the fixed assets which their capital
profits are subjected to tax as follows:
1. Buildings, structures/ sea crafts, and air crafts;
2. Intangible assets e.g., goodwill;
3. Land, pieces of arts, antiques, jewels, and any other similar
no depreciable assets.
The capital profits on sale of these assets or on receiving of
indemnities as a result of their destruction or losing are subject to
tax, on condition, of complying with tax department depreciation
33
(Legal) Persons
rates, as follows:
Sales proceeds (or indemnity received) XXX
Less: Net book value of the fixed asset:
Book value XXX
- Accumulated depreciation (XXX)
XXX
+ Removal costs XXX
The capital profits subject to tax (XXX)
(XXX)
As for the capital profits which are taxable according to
article (17) of the law.
The capital profits of other assets such as computers,
information systems, software and data storage sets and all other
assets of activity, such gains are exempted from being taxed.
(B) Revaluation Profits:

If we review the context of Article No. 20 the tax law, we shall
find out that this Article has stipulated that:
The exposure of revaluation profits to tax depends on
whether or not there is a change in the legal status of the business
firm.
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(Legal) Persons
 If there is no change in the legal status of the business

firm, then revaluation profits are viewed as paper profits,
and hence, are not subject to tax.
 If there is a change in the legal status of the business by
presenting it as shares in kind in the capital of a joint stock
company, so when nominal shares in kind are presented to
the owner, and the owner does not sell these shares for 5
years & more, then the revaluation profits are exempted
from being subject to tax.
We think that in case of the association of the revaluation
process with the joining up of a new partner, what would be
subjected to taxation should be what old partners benefit in profit
resulting from the in-coming partner only, even if the results of
the revaluation process, because these profits were not realized
and no real additions occurred as to the equities or rights of old
partners.
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(Legal) Persons
Examples (1):
A single firm purchased a building as a store for L.E.
100,000 on April 2008, the legal duties and fees were L.E. 7000,
other expenses related were L.E. 3000. On first of April 2010 the
firm spent L.E. 20000 to renew the building. On Dec.31, 2010
the building was sold at L.E 180,000, and the expenses related to
this process were L.E. 30,000. Noting that:
 The annual maintenance expenses amounted to L.E 2000.
 The depreciation rate for tax purposes is 5% annually.
Required: Determine taxable capital gains of the building.
Solution:
L.E. L.E.
Sales proceeds: 180,000 - 30,000 150,000
Less: Book value:
Purchase price 100,000
Legal duties 7,000
Other expenses related Total cost 3,000
Total Cost 110,000
Renewable expenses 20,000
130,000
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(Legal) Persons
Less: Accumulated depreciation:

Till April 1,2010=110000 x 5% x 2 = (11000)
From April 1,2010 (4875)
=130,000x5%x9/12
Book value (114,125)
capital gains 35875
Note: Maintenance expenses are not included.
Example (2):
A single Firm sold premises, the net book value of which
amount to L.E. 70,000, for the amount of L.E. 78,000, bearing
removal costs amounting to L.E. 1,800. The profit for the year
amounting to L.E. 87,000 exclusive of gains on the premises
sales.
Required:
Determine the proper tax bracket noting that the firm holds
regular accounts.
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(Legal) Persons
Solution:
L.E.
Net profit 87,000
Add:
Net capital gains resulting from the sale of the 6,200
premises.
This is calculated as follows:
Sale price - (net book value + removal expenses)]
[78,000 – (70,000 + 1,800)]
Taxable Net Profit 93,200
Recovered Bad Debts:
Recovered bad debts are debts which the firm succeeds to
recover during the year from the customers whose debts were
written off in the previous years.
That the tax administration approved this debt as a cost or
expenditure in the year during which it was written off. In this
case, when collecting this debt, the tax administration has the
right to subject it to taxation, and accordingly include it in the
elements of revenues on tax bracket determination. That the tax
administration did not approve this debt as part of the elements of
expenditures in the year, during which it was written off. In this
case, the recovered debt must be not being included in taxable
revenues.
If we suppose that a firm collected, during the year, debts
which were written off during previous years for an amount of
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(Legal) Persons
L.E. 2800 which it included into the profit as revenue. When

examining these debts it was revealed that there is a part
amounting to L.E. 2000 the tax administration approved as a bad
debt in the year, in which it was written-off, with the remaining
balance not approved by the administration. When preparing the
tax declaration for the current year an amount of L.E 800 is to be
excluded from the taxable net profit for the value of collected bad
debts which the administration did not approved as a bad debt
during the year in which it was written-off.
Example:
Assume that net accounting profit in the income statement
is LE. 700,000, while bad debts recovered are LE.100,000. The
tax determent found out the following:
 Bad debts recovered of L.E.20,000 were not previously
accepted by the tax department as a bad debt due to the
insufficiency of the legal procedures exerted by the
business.
 Bad debts recovered that were admitted as bad debts
15years agoL.E.80,000 but not recorded in the income
statement.
Required:
Make out the necessary adjustments.
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(Legal) Persons
Solution:
Net accounting profits 700,000
+ Additions :
Bad debts recovered not recorded 80,000
The bad debts recovered that were
previously accepted by the tax
department but not recorded and shown
on the income statement have to be
subject to tax.
- Deductions :
Bad debts recovered not previously 20,000
admitted
The bad debts recovered that were not
accepted by the tax department should
be excluded from being subject to tax to
avoid double taxation.
Other Revenues:
These revenges emanating from carrying the firm out
transactions which are not included within its basic activity. The
following are some examples of such revenues:
[1] Compensations:
These items are amounts received from others for damages
suffered by the firm resulting from un implementation of
contractor delay in their implementation, or breach of contract.
Such compensations are entered in the taxable revenues of the
firm on cash basis
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(Legal) Persons
If compensations received from insurance companies as a

result of damage occurred to fixed assets of the firm, the excess
over the book values of the assets is considered as capital gains
and is entered in taxable revenues of the firm (refer back to the
taxable capital gains in previous pages).
[2] Subsidies:
Subsidies are amounts the firms use to receive from some
other entities to achieve economic or social objectives, they
include not only cash amounts, but also other property or services
received. Cash subsides are taxable on a cash basis. If the subsidy
is in a form of other than cash, the amount to be included in the
taxable profits is the fair market value of the subsidy at the time
it is received.
[3] Foreign Currency Gains:

In case of transactions between business firms of different
countries, the amounts receivable and payable are denominated
in the local currency of the buying firm or the selling one. If there
is a change in the exchange rate of currency, the excess amount is
realized by the taxpayer, and this excess amount is treated as
taxable profit. On the other hand, if the excess amount occurs as
a result of translating the accounts into local currency as fictitious
profit, therefore, will not be included in the taxable profit.
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(Legal) Persons
[4] Revenues of Securities:

Revenues emanating from investments which the firms
carry out of its choice in a temporary or implementation of legal
provisions or others. Examples of such revenues are returns
earned from dividends received on investments in stocks of stock
companies or returns earned from investments in bonds issued by
other entities.
These revenues are exempted from tax according to Article
(31) of the law No. 91/2005.
[5] Returns of Deposits and Saving Accounts:

Such returns derived from deposits and saving accounts
with registered Banks and post-office saving fund. These returns
are exempted from tax according to the present law as cited in
Article No. (31).
[6] The discount received is an income the cash

discount received.
The cash discount received is an income the cash discount
received is an income subject ta unless it was deducted from the
cost of purchases.
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Examples:
Assume that net accounting profit as per income statement
for the year, L.E. 35000.The tax examinant revealed the
following:
D. Revenues of the firm include: L.E. 4500 bad debts
collected of which an amount of L.E. 4000 was
approved by tax authority - L.E. 3000 juridical
compensation in favors of the firm for counterfeiting
its trade name, noting that the amount collected was
L.E. 2200 only- L.E. 5000 interest of installment sales-
L.E. 2600 as a profit on sale of securities listed on the
Egyptian stock of Exchange- L.E 3900 profits of shares
in private Egyptian shareholding company-L.E 7600
interests of deposits with banks -L.E 11000 revenue of
realty, (noting that the monthly rent is L.E 1000)-
foreign currency variance of L.E. 8000 which include
L.E 1500 as a result of translating the foreign account
into local currency.
E. Revenues of the firm not included: L.E. 6000
compensation received from an insurance company for
goods which were damaged by fire, noting that this
amount was used to purchase other goods - L.E 4000
subsidies received from the city council of which L.E
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1000 in cash and the rest is in the form of computer

hardware, its market value is L.E 6000.
Required: Determine the taxable net profit for the year 2010.
Solution:
L.E. L.E.
ANP 35000
Add:
1 - Accrued revenue of realty according
to the accrual basis (1000 x 12)-11000= 1000
2 - The entire amount of compensation
for damaged goods, because it is taxable
regardless the replacement. 6000
3 - Subsidy received in cash, because it
is taxable. 1000
4 - The market value of subsidy received 6000
in kind, because it is taxable.
14000
Total
Deduct: 49000
1 - Bad debts collected, not taxable
because it was not previously deductible
4500 – 4000 = 500
2 - Juridical compensation not collected
because it was taxable on cash basis. 800
3- The currency gain of translation, not
taxable because it is fictitious profit. 1500
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4 - Profits on sale of securities listed on

the Egyptian Stock of Exchange 2600
5400
43600
Adjusted Net Profit

Exemptions:
1 - Profits of stocks in private Egyptian
shareholding company. 3900
2 - Interests of deposits with banks. 7600
11500
32100
Second: Expenses and costs:
All amounts that subtracted through their deductions
revenues in order to determine net are allowed to be from total
taxable profits or taxable income. They include expenses, losses
and all other costs and allowances that are to be matched against
revenues.
They are some general conditions for deducting such
expenditures, including the followings:
1. Expenditures related to the specific financial year.
2. Expenditures related to the business entity not to the owner.
3. Expenditures are revenue not capital ones.
4. It has to be true and supported with documents.
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Deductible Expenses by Law:

Article No. (23) of the present law lists many items as
deductible expenses. These items in detail are as follows:
[1] Interests on loans:
The law sets some conditions for such expenses to be
deductible; they are as follows:
a) The loans shall be paid to natural person who is
subjected to tax. If this natural person is not subjected
to tax or exempted from it, the interests on loan and
debts are not considered as deductible costs, according
to Article (24) of the law.
b) The interests paid shall not exceed twice the discount
rate of interest declared lay the Central Bank at the first
January of every week. The interests increased to twice
the discount interest rate declared by the Central Bank,
are not considered as deductible costs.
c) The credit interests received by the firm from others
shall be deducted from the debit interests.
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(Legal) Persons
Example:
The loans borrowed by a commercial single firm to be
used in its activity were L.E. 500,000. If you learn that:
 The interest paid for those loans for the year 2011 was L.E.
135,000.
 The discount rate declared by the Central Bank on January,
2006 was 12%.
 Revenues of the firm for 2011 included L.E. 65,000
interests of bonds registered.
Required:
Determine the deductible interests for year 2011.
Solution:
L.E. L.E.
Interest paid 135,000
Imputed amount of interest (twice the
discount rate of central bank
500,000 x 12% x 2 120,000
Debit interest approved by the tax
authority 120,000
Less: Credit interests (65,000)
Deductible Interests (Costs) 55,000
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[2] Depreciation of assets:

The normal depreciation rates set forth by the tax law, article (25)
as follows:
. 5% of the costs of buying establishing developing, renewing or

re-establishing of any of building, establishments, installations,
ships and aircraft in every tax period.
. 10% of the costs of buying, developing or renewing any of
intangible assets that are bought including goodwill in every tax

period.
. The following two categories of business assets are to be
depreciated according to base of depreciation system.

(a)Computers, information system, software, and sets of data
storing at 50% of tax base in every tax period.
(b)All other business assets at 25% of tax base in every tax
period.
 No depreciation to be computed for land, artistic and

antiquities works, jewelry and any other business assets
non- depreciable by their nature.
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 Depreciation basis:
The depreciation basis, in applying the provisions of
Article (25) of the present law, shall mean the book value of the
assets as recorded in the opening balance sheet of the fiscal
period. This basis shall increase by the equivalent of the cost of
the used assets and the cost of development, improvement,
renovation or reconstruction during the fiscal period. The
depreciation basis shall decrease by the equivalent of the value of
annual depreciation and the sale value of assets that are disposed
of as well as the fiscal period.
Cost assets XX
+ expenditures & expenses XX
-sales value XX
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Depreciation Basis
Positive + Negative -
The value of the assets shall
be added to commercial and
industrial profits.
The value exceeds The value doesn't exceed

ten thousands: ten thousands:
Calculate depreciation Depreciation basis considered
with the normal rate. deductible cost.
Then the value according to which depreciation is calculated:

a) If the depreciation basis is negative, the value of the assets
shall be added to the tax payer's commercial and industrial
profits.
b) (a)If the depreciation basis (positive) doesn't exceed
10000, the depreciation basis shall be wholly considered
among the deductible cost.
c) If the depreciation exceeds 10000, we must calculate the
depreciation normal rate.
Note: The depreciation is calculated on the total assets
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Accelerated depreciation:
Article (27) stipulated that costs include:
30% of the cost of machines and equipment's purchased by
the firm whether they are new or used for one – time only.
Characteristics of this depreciation:
- It is an incentive to motivate taxpayer to replace their old
machines with other ones.
-Its rate is 30% that is calculated first and for once only, the
normal depreciation is to be calculated on the remaining
cost 70%.
This depreciation would allow and able the firm to depreciate its
own fixed assets over a period shorter than their production life-
span, since in the first year the asset is depreciate at the normal
rate plus the 30% rate.
For example if a specific business purchases anew machinery

that has a cost of £20000 to be used in production on 1/7/2005,
determining depreciation would be as follows:
First year:
Accelerated depreciation = 20000 × 30% =£6000
Remainder = 20000 – 6000 =14000
Assuming that the normal depreciation rate is 25%
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annually, (according to tax law) thus, annual depreciation

=14000× 25% = £3500 total depreciation for ½ of the first year =
6000 + 1750 = £7750.
Benefiting from accelerated depreciation the depreciation
will be only one time.
Existence of regular books of account in the firm
Example (1):
Depreciation of buildings ,contractions, etc. :
ABC firm owned a factory which was built on January
1,1995 at a cost of L.E. 200,000 on march 2006, the firm built a
new factory at a cost of L.E. 400,000 of which the land purchase
for this building costs L.E. 100,000 the firm built an office as a
reception lodge at a cost of l.E.60,000 on May 1,2006 the firm
renewed its old factory at a cost of L.E. 70,000 of which L.E.
10,000 repairs expenses.
Additional information:
 The new building was used from June 1,2006.
 The book value of the old factory on January 1,2006 was
L.E. 100,000.
 The accounting period ends on December each year.
Required:
Compute the taxable depreciation expense for 2006
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Solution:
L.E.
Amounts subjected to depreciation
A. Original cost of old factory 200,000
B. Renewable cost as from 1/5/2006 60,000
70,000 – 10,000
C. Original cost of the new factory as from 300,000
1/3/2006 : 400,000- 100,000
D. Cost of reception office as from 1/3/2006 60,000
Total 620,000
Taxable depreciation expense :
200,000 × 5% 10,000
60,000 × 5% × 8/12 2,000
300,000 × 5% × 10/12 12,500
60,000 × 5% × 10/12 2,500
Total 27,000
Example (2):
Intangible assets: An individual purchase a patents for some
products as follows:
a. L.E. 24000 for the patent of product (x) on first march.
b. L.E. 30,000 for the patent product (y) on first July 2005 if
you learn that :
c. He sold the patent related to product (x) to another
individual at the end of June 2006 at L.E. 25000.
d. He prepares his accounts on 31, Dec of every year.
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Required:
Compute the tax depreciation that must be considered as
deductible cost for the year 2005 & 2006.
Solution:
L.E.
Year 2005 :
- Depreciation of cost of patent for product (x) 2000
= 24000 × 10% × (10/12)
- Depreciation of cost of patent for product (y) 1500
= 30000 × 10% × (6/12)
Total 3500
Year 2006 :
- Depreciation of cost of patent for product (x) 1200
= 24000 × 10% × (6/12)
- Depreciation of cost of patent for product (y) 3000
= 30000 × 10%
Total 4200
Note :
Capital gains related to selling the patent of product
(x) = 25000 – 20800 = 4200, must be included in the
revenues that taxable for the year 2006.
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Example (3):
Computer hardware, software:
ABC firm began its operation on January 1, 2005 and its
accounting period ends on December. The firm purchased some
computer for operations as follows (amount in L.E.) :
 On Nov. 1,2005 at cost of L.E. 15,000
 On April 1,2006 at cost of L.E. 5000
 On march 1,2007 at cost of L.E. 3000
Required:
Compute the taxable depreciation expense deductible
through 2005 till 2007.
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Solution:
L.E.
1 - For year 2005 : 15,000
Addition of Nov. 1,2005 (7,500)
Less : annual depreciation expense 7,500
15,000 × 50%
2 - For year 2006 :
Addition April. 1,2006 5,000
depreciation balance 12,500
Less : annual April 1,2006 = 12,500 × 50% (6,250)
3 - For year 2007 : 6250
Addition march 1,2007 3,000
Less : annual depreciation expense 9,250
(9,250)
--------
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Example (4):
A sole proprietorship prepares final accounts on
December 31. The following transaction took place
during 2006:
f) 15 June 2006, computer sold (originally purchased for
L.E. 6000) for 6500.
g) 10 may 2006, computer purchased for L.E. 10000
If you learn that the depreciable balance on 1 January
2006was L.E. 12000,
Required:
Compute the taxable depreciation expense for 2005
Solution:
L.E.
Beginning balance 12,000
Addition – 10 may 2006 10,000
22,000
Less : sale proceeds – 15 June 2006 (6,500)
15,500
Less annual depreciation : 15500 × 50% (7,750)
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Ending balance 7,750
Example (5):
A sole proprietorship prepares final accounts for the nine-
month period ended Dec. 31,2006. At 1 April 2006 the balance
brought forward on the pool of expenditure was L.E. 12400, on
31 may 2006 the firm acquired computer costing L.E. 7200 that
is included in the pool, and sold computer for L.E. 5600
Required:
Compute the taxable depreciation expense for the period
ended Dec. 31, 2006.
Solution:
L.E.
Addition – 31 may 2006 7,200
19,600
Less : sale proceeds (5,600)
14,000
Less : Tax depreciation : 14000 × 50% × (9/12) (5,250)
Ending balance 8.750
Note: If the tax period is less than 12 months long, then the
depreciation is scaled down proportionately.
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Example (6):
Other assets:
An individual began his commercial business on March 1,
2006 he purchased a furniture and a car on July 1, at a cost of
L.E. 20,000 and L.E. 35,000 respective on 31 Dec 2006 he sold
the car for L.E. 28,000
If you learn that he prepares his accounts to 31 Dec.
Required:
Compute the taxable depreciation expense for the period
ended Dec 31, 2006.
Solution:
L.E.
Additions – July 1,2006 :
- Furniture 20,000
- Car 35,000
55,000
Less : sale proceeds for car (28,000)
27,000
Less : Tax depreciation : 27,000 × 25% ×(10/12) (5,625)
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(Legal) Persons
Example (7):
A sole proprietorship prepares final accounts on Dec 31,
2006 the following transactions took place in 2006.
(a) On June 1, 2006 furniture sold for L.E. 6,000.
(b)On May 1, 2006 furniture purchase for L.E. 2,500.
If you learn that the beginning balance on January 1,2006
was L.E. 3,000.
Required:
Indicate the effect of these transactions on the taxable
profit for the year 2006.
Solution:
L.E.
Additions – may 1,2006 2,500
5,500
Less : sale proceeds -June 1,2006 (6,000)
(500)
Since, the depreciation basis was negative by a value of
L.E. 500 thus it shall be added to the taxable profit of the firm.
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Example (8):
Accelerated depreciation:
An industrial sole proprietorship prepares its ending
financial accounts at Dec. 31, the firm had the following
transactions in 2006:
(a)On June 15, purchased used machines &equipment's for L.E.
6,500.
(b)On August, purchased new machines &equipment's for L.E.
12,000.
(c) On November 30, sold machines &equipment's for L.E.
2,800. The beginning of machines &equipment's at 1,
January 2006 was L.E. 15050.
If you learn that the firm has regular books, and the
machines &equipment's was used through the year 2006.
Required:
Compute the taxable depreciation expense for the year 2006.
Solution:
L.E.
Beginning balance 15050
Additions :
15 June 2006- 6,500
31 Aug 2006- 12,000
18,500
Less:A,D=18,500×30% (5,550)
12,950
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28,000
Less: sale proceeds 30 Nov,2006 (2,800)
25,200
Less : tax depreciation : 25,200 × 25 % (6,300)
(3) Charities and donations:
According to item (3) of article (23), duties and taxes paid
by the taxpayer are to be deducted from the tax base except the
tax paid in accordance with this tax law.
(a) Charities and donations to the government, units of local
administration and public authorities. They are deductible
whatever their amounts are and without any condition.
(b) Charities and donations paid to Egyptian Charitable societies
and social institutions that are registered, in addition to
educational institutions and hospitals working under
governmental supervision.
Such charities are deductible provided that they don't
exceed 10% of the firm's annual profit.
(4) Social insurance premiums:
Article (23) in its item (6) stipulated that insurance
premiums concluded by taxpayer against his disability or
decease, or for obtaining an amount or revenue providing the
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value of premiums shall not exceed L.E. 10,000 a year.

(5)Amounts deducted annually for account of special funds:
In order for these amounts to be deductible, the following
conditions should be satisfied:
 Amount deducted annually for the account of special funds
and not more than 20% of total salaries and wages.
The deducted exceeds the 20% in question; the excess
should be added back to profits.
 The fund has its own statutory regulation.
 The funds should be separated from the firm's funds.
 The funds should be invested for its own account.
(6) Tax and Duties:
Article (23) of the tax law stipulated the following as a part of
deductible costs:
"Direct taxes paid by the tax-payer with the exception of
the tax which he disburses according to this law".
(7) Social security installment:
Item (4) of Article (23) stipulated that amongst costs are
"the social security installments imposed on the owner of the
firm in favor of his employees and in his own favor and which
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are paid to the general social security authority or to insurance

and pensions general authority".
(8) Salaries and commission:
a) Salaries and commissions paid to owner are considered all of
profits and not expenses, it is a must, when preparing the
tax declaration to add this salary to profits, while taking
into consideration that they should be added to the share of
each partner when distributing profits in-between them.
b) Salaries and commission paid to others these are expenses and
thus are deductible.
c) Salaries as part of costs, all of which would be on condition
that they perform actual work in the firm, and that their
salaries would be within the reasonable limits compared
with the salaries of equals .that the salary would be
adequately suitable to the nature of the work and its
importance, especially if the employee if related to the
employer by family ties in individual firms and private
companies".
(9) Advertising and promotion expenses:
a) Periodic advertising expenses: Which aim at reminding
customers with the products of the business. They are
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deductible in the same year in which they were incurred by

the taxpayer.
b) Amounts of advertising campaigns: They are usually
amortized during a period of 3-5 years.
c) Amounts of (lighting) fixtures: They are to be depreciated at a
rate of 25% annually according to depreciation base
system.
(10) Losses:
a) Actual Capital losses: They are deductible costs in the year of
incurring the actual loss.
b) Revaluation losses of assets: They are not deductible as they
are not really incurred.
c) Previous years’ losses: Balance shall be carried forward to the
following year and so on till the fifth year. But, no balance
of such a loss shall be carried forward to another years
account. Thus, the following conditions shall be satisfied
in order to benefits from the carrying of losses forward for
a period of 5 years.
(11) Bad debts:
They are deductible in the tax year in which the debt was
provided and that can’t be collected.
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According to tax law, to deduct bad debts, a report from an

auditor should be presented including the fulfillment of the
followings:
a) The firm keeps systematic books and records.
b) The debt relates to the business activities.
c) The amount of the debt was previously recorded in the
business books of accounts.
d) The firm has taken legal procedures to collect the debts,
but does not able after 18 months from its due date.
(12) Insurance on assets of the business:
a) If insurance premiums are not recovered, (not returnable) they
are deductible.
b) If insurance premiums are recovered (returnable), they are not
deductible, as they are considered as assets.
(13) Fees and compensations:
The tax department has issued its instructions allowing for
such amounts to be deducted if:
a) They relate t o a specific dispute that relates to the activity
of the business.
b) They have the revenue characteristics.
c) They are not related to breach of tax laws or compulsory
pricing laws or the similar.
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(14) Insurance premiums of the taxpayer:

These premiums against his disability, or death, or
pension, are deductible but not exceeding L.E. 10,000 per year.
(15) General and administrative expense:
They are deductible usually as they satisfy the general
conditions for determining expenses.
You have to notice that any mixed expense, i.e. an expense that
has a personal part, should be divided into two parts. Only
the part belongs to business activities will be deductible
from the tax point of view.
Difficult to be determined, it is arbitrary considered as 1/3
of the total amount of the expense.
You have to know that the tax law does not consider the
following as deductible costs or expenses:
-Provisions and reserves.
-Fines and compensations of crimes.
-Taxes on income due by this law.
-Interest on settled loans of the excess of two folds of credit
discount rate announced by central bank of Egypt at the
beginning of the year.
-Interest on loans paid to natural persons not liable to tax
(or exempted).
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Expenses are not supported by documents:

If expenses without documents, approved in an amount
that does not exceed 7% of total general expenses.
However, if they exceed that much, only what within the
limits of the rate in question can be approved, with the rest being
added back to profits.
We believe that these expenses should be characterized

with the following features in order to allow their deduction:
1- Their amounts should be within the limits, with which

gratuities are usually paid.
2- They should be paid to persons whose social and
employment level would not be of an upper nature.
3- They have to be paid voluntarily or optionally.
Example of these expenses are:
 Internal travel.
 Refreshment, (buffet expenses).
 Postage's.
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 Pity cash expenses.
 Cleaning expenses.
Example (1):
A,B and c are partners in general partnership in Cairo ; the
following is the profit and loss a/c of the partnership for the year
ended 31/12/2011.
Salaries & wages 4500 Gross profit 8000
Discount allowed 300 Discount received 500
Commissions 700 Dividends 500
Bonuses to employees 1000 Sundry revenues 2000
Depreciations 500
Donations 180
Taxes & duties 120
Advertising expenses 1000
General expenses 1200
Net profit 1500
11000 11000
The following data are also given:
1. Salaries include £ 600 to a for management, and £ 400 to b
for book- keeping.
2. Commissions include £ 200 to c for profitable transaction.
3. Bonuses to employees are equivalent to 4 months' salary.
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4. Donations paid to individuals £ 100.

5. Advertising expenses include £ 900 for a big drive.
6. Interests on capital £ 600 (equally) included in the general
expenses.
7. Sundry revenues include: £400 capital gains, £ 700 profits
on revaluation.
8. Goods in- transit of £ 2500 not yet included in the stock
attend.
Requirements:
Tax base, giving reasons.
Solution:
Net a/c profit 1500
+ additions
Salaries of (A) 600
Salaries of (b) 400
Commissions to (c) 200
Donations to individuals 100
Advertising exp.(big drive over 3
years) 600
Interests on capital 600
Stock in transit 2500 6500
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6500
- Deduction
Dividends (exempted by law 500
Profits on revaluation 700 1200
Tax base of the partnership L.E. 5300

Taxes due = 5300 × 20% = L.E. 1060
N.B: The comments are your responsibility to refresh your
mind.
Example (2):
The profit & loss a/c joint stock company in Egypt for the year
ended 31/12/2011 shows net profit of £20000.
The following data are also extracted from the books of the
company:
1. Salaries include £ 7000 salaries of past year but settled this
year.
2. General expenses include.
A-Donations to government £ 500 and to recognized
charities £ 900.
B-Legal expense £ 4000 including £2100 duties paid for
registering a piece of land bought this year.
C-Insurance paid to suppliers £ 1000 and against fire £650.
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[3] Advertising expenses include £ 8000 huge campaign for 4

years starting this year.
[4]Depreciations include £ 1000 normal depreciation of
machinery bought this year costing £ 7000.
[5]Attendance fees for shareholders £ 2000 and share in profits
for employees £ 3000 are included in the administrative
expenses, in addition to £ 1000 provision for doubtful
debts.
[6]Other sundry revenues include £ 5000 the amount of
compensation collected from an insurance co. for
damaging goods costing £3000.
Requirements:
 Tax base of the company.
 Comments (N.B they are left for you).
Solution:
Net a/c profit 20000
+ additions
Salaries of last year 7000
Donations to charities (added
temporary) 900
Capital expenditure (duties paid for 2100
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Registering lands)
Insurance to suppliers (returnable) 1000
Advertising expenses (for coming
periods) 6000
Administrative expenses :
Attendance fees (not accepted by law) 2000
Share profits of employees (not
accepted By the law) 3000
Provisions (not accepted by the law as
Deductible expenses) 1000
Total 23000
43000
- Deductions
Accelerated depreciation of
machinery (7000 × 30%) 2100
Sundry revenues added by error 3000
(profit = 5000 cost 3000 = 2000
accepted
But, revenues credited by error 5000
So, mistakes revenue = 3000 5100
37900
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- Donations to charities within 10% of

tax base tax base of co. 900
taxes due = 37000 × 20% = £ 7600 £ 37000
Example (3):
The following profit and loss a/c of a sole proprietorship
for the year ended Dec. 31, 2010.
Wages, salaries & 80000 Gross profits 170,000
bonuses
Reserves 30000 Discount earned 20,000
Insurance premiums 15000 Recovered bad 20,000
& deposits debts
Advertising expenses 15000 Stock dividend 3,000
revenues
Taxes 18000
Net Profit 75000
240000 240000
 Tax examination of the firm's books revealed the following :
(1) Wages, and salaries included:
 L.E. 14,000 an annual salary for the son of the firm's owner.
He actually manages the firm) equivalent manager's salary
is L.E. 12,000)
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 L.E. 3,000 a bonus to the firm's owner.

 L.E. 8,000 a bonus to the firm's staff members as a
distribution of the firm's profits
 The remaining is the staff members' salaries.
(2) Reveres included:
 L.E. 5,000 a reserves for fixed assets depreciation.
 L.E. 6,000 a reserve for doubtful debts.
 The remaining is an emergency reserves.
(3)Insurance premiums and deposits included:
 L.E. 5,000 a deposit for a governmental bid.
 The remaining amounts are fire and the insurance premiums
on the firm's assets.
(5)Advertising expense included:
 L.E. 10,000 the cost of an advertising campaign of a new
product.
 The remaining amounts are periodical advertising costs.
(6) From the recovered bad debts, the tax department approved
only L.E. 12,000 in 2005 when these debts were
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considered uncollectible.
(7)Taxes included:
 L.E 3,000 tax on stock dividend revenue.

 L.E. 6,800 tax on commercial and industrial activities,
revenues deducted from the sale revenue that the firm
earned from sales to a governmental entity.
 The remaining are custom duties for imported goods.
 Miscellaneous expenses included L.E. 500 not documented
expenses.
Required:
Prepare the firm's tax declaration for 2010, and determine
the taxable net profit given that the firm's results for previous
years were as follows:
2009 2008 2007
L.E. 6,000 profit L.E. 7,000 profit L.E. 20,000 loss
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Description Additional Deductions

to net from net
profit profit
Accounting net profit : 75,000
1 - Wages, salaries and bonuses :
 The excess in the salary of firm
owner's son over the salary of
equivalent managers 2,000
(L.E. 14,000 – 12,000 = 2,000)
 Bonus of the firm's owner is not
considered expenses. It must be
taxed according to art no 30 of
the law. 3,000
 Staff members bonuses as a
distribution of the firm's profits
are not approved as expenses 8,000
2 - Reserves :
 Provision of fixed assets
deprecation is approved because
it is an actual expense
 reserve for doubtful debts not
approved 6,000
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to net from net
profit profit
 Emergency reserve is not
approved because it is considered
as a reserve 19,000
3 - Deposits and insurance
premiums:
 Bid deposit is not approved a an
expense because it will be
retrieved then it must be added to
not profit 5,000
 Fire and theft insurance
premiums are approved as
expenses in full.
4 - Advertising expenses :
 The cost of the advertising
campaign must be allocated over
a period of 3 to 5 years
the annual approved part of this cost
= 10,000 ÷ 5 years = L.E. 2,000
 The excess L.E 8,000 must be 8,000
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to net from net
profit profit
added to the net profit because
they are deferred revenue
expenses
 Periodical advertising expenses
are approved
5 - Recovered bad debts:
 Bad debts that were not approved
by the tax department as
uncollectible in 2005, are not to
be taxed when recovered in 2010
they must be deducted from net
profits
The unapproved amount :
= 20,000 – 12,000 = 8,000 8,000
6 - Taxes :
 The tax on stock dividend
revenue is not approved as an
expense (art. no. 29) it is added. 3,000
 The tax deducted from the sales 6800
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to net from net
profit profit
revenues is not approved as an
expense because it is a tax on
commercial and industrial
activity revenue (art. No. 23)
then it must be added
 Custom duties are approved
7 - Expenses without documents
 Approved is an amount that does
not exceed 7% of total general
expense. 10
8 - Stock dividend revenue
 the revenue must be deducted in
full according to (art. No. 31)
because the firm did not inure
any costs to get it. 30,000
Total profits after addition 135,810
(38,000) (38,000)
Total deduction
Net profit 97,810
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to net from net
profit profit
Less : Losses forwarded from
previous years which are losses
from 2004 not covered by the
profits of 2005 and 2006 (20,000)
Taxable net profit 77,810
Example (4):
The following is the income summary of ABC industrial
firm presented to the tax department with their tax declaration for
2006 (amount in L.E.).
Wages, salaries 8000 Gross profits 17500
Deprecation of fixed 800 Recovered bad 200
assets debts
Advertising expenses 1,600 Discount earned 300
Differences in 300 Gains of machine 5000
taxation sale
Donations 1,500
Bad debts 800
General expenses 4,000
Revaluation losses 3,000
Net profit 3,000
23000 23000
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On tax examination, the following facts were revealed:

(1)Salaries included the following:
 A monthly salary to the owner of L.E. 200.
 L.E. 1,000 annual bonus to staff members, and,
 The remaining is the total annual salaries of staff members
(2) A new machine was purchased and used in production
starting from Jan 1, 2006 its cost was L.E. 4,000 the firm did not
record any depreciation for that machine.
(3) Advertising expenses included L.E. 1,500 the cost of a
campaign that will last for 3 years starting from July 1 st,
2006 the balance represented the cost of greetings
published in newspapers when the owner came back from
pilgrimage.
(4) Donations considered of L.E. 1000 to poor family, and the
balance to an Egyptian charity associating.
(5) The firm did not take legal actions to collect the bad debts,
and recovered bad debts were not approved by the tax
department when they were written off.
(6) General expenses included L.E 1,200 as the firm's car that
was also used by the owner for his private affairs and L.E.
700 the cost of a present for his daughter on her marriage.
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(7) The cost of ending inventory recorded was L.E. 4,000 its
actual cost was L.E. 9,000 and its selling price was L.E
13,000 (the firm used to determine inventory value based
on the cost or selling price whichever is lower).
Required:
Given the firm's books were approved by the tax
department calculate the tax on the revenue of industrial activity
for this firm.
Solution:
Determination of taxable net profit:
= L.E Accounting net profit (ANP) 3000

Add :
 The annual salary of owner it is not an
expense but a profit distribution. 200 X 12 2400
 The staff members bonus is not expense. 1,000
 The excess over the year's share of the
advertising campaign's cost
 The year's share = 1,500 × 1/3 × 6/12 =
L.E. 250.
 The excess = 1,500 – 250 = L.E. 1,250 1,250
 The remaining advertising expenses are
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approved in full because they are periodical

advertising expenses
 Donations to the poor family are not
approved as expenses. 1000
 Donations to the Egyptian charity association
are to be added temporarily in order to
determine the taxable net profit. 500
 Bad debts are not approved as expenses
because the firm did not take legal action to
collect them 800
 1/3 of the car expenses used by owner in his
private affairs 400
 The cost of the present to his daughter for her
marriage is not an expense. It is a profit
distribution. 700
 The difference in the value of ending
inventory that had to be valued on cost or
selling price which is lower. The differences =
9,000 – 4,000 = L.E 5,000 5,000
 Differences in taxation are not expense. 300
 Revaluation losses are not approved as
expenses because they are artificial losses. 3,000
 Net profit by additions. 19,350
Less :
 accelerated depreciation of the new machine
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(according to item 2 of (art.no 23) = 4,000 ×

30% = 1,200. (1,200)
 Normal depreciation of the machine =

(4,000 – 1,200) × 25% = L.E. 700 (700)
 Recovered bad debts that were not approved
by the department when written off (200)
net profit before deducting donations 17250
Less:
Donations to the Egyptian charity association which
are approved is not more than 10% of the annual net
profit.
Paid donations = L.E. 500
10% of profit – 17,250 × 10% = L.E. 1725
The amount to be deducted is 500 (500)
Taxable net profit 16,750
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Exercise
Question (1):
Write the short notes on the tax treatment of the following
items.
1. Special funds.
2. Recovered bad debts.
3. Expenses not supported by documents.
4. Wages and salaries.
5. Donations.
Question (2):
State true or false and correct the false statement:
A. The accelerated depreciation 30% is applied to all assets
every year.
B. Donations paid to the government should not exceed 10%
of the net taxable annual profit of the firm in order to be
considered a deductible cost.
C. Salaries of the owners of a firm is considered a deductible
expense.
D. Expenses not supported by documents should not exceed
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7% of net profit of the firm.

E. Amount deducted for special funds should not exceed 20%
of salaries & wages of the firm is employees.
Question (3):
A,B,C are partners in a general partnership in Cairo, they
started their activity on 1/1/2005, the following is the profit and
loss account for the year ended 31/12/2005 showed Net profit of
a value 137,500 L.E The following data are also given:
1. Salaries included 600 to A &400 to B for management.
2. Commissions include L.E 200 To C for profitable
transaction.
3. Advertising expenses include L.E 900 For 3 years.
4. General Expenses included 600 interests on capital
5. Sundry revenues include L.E 400 capital gains, L.E 700
profit on revaluation
6. Donations consisted of L.E 500 to government, L.E 900 to
recognized charities and L.E 400 to poor individuals.
7. Goods in-transit of L.E 2500 not yet included in the stock
attend
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REQUIRED:
Determine tax base on partnership profits
(comment on your answer)
Question (4):
A,B are partners in a general partnership in Cairo, they
a value 137,500 L.E The following data are also given:
 The Inventory on 31/12/2005 showed that purchased goods
of a value 80,000 L.E was not recorded because it didn't
arrive yet
 200,000 salaries of employees(monthly salaries 20,000)
 60,000 salary for partner A for management
 20,000 interest on capital
 30,000 advertising campaign for a period of 3- years
starting 1/1/2005
 20,000 provisions for doubtful accounts(for 10% of
clients)
 26,000 building rental for building occupied by company
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(monthly rent 2000 L.E).

 Donations of value 30,000 L.E includes 15000 L.E
donation to Cairo university,10,000 L.E to Elwefaa Wel
Amel The remaining for the poor family
 Revenue included:-
o 3000 L.E discount
o 5000 L.E gains realized by the company from
securities recorded in Egyptian stock exchange.
REQUIRED:
Calculate the taxable net profit
Question (5):
A,B,C are partners in a general partnership in Cairo, they
a value 150000L.E
The following data are also given:
A. Salaries included 800 to A &1000 to B for management.
B. Commissions include L.E 200 To C for profitable
transaction.
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C. Advertising expenses include L.E 900 For 3 years.

D. General Expenses included 600 interests on capital
E. Sundry revenues include L.E 600 capital gains, L.E 800
profit on revaluation
F. Donations consisted of L.E 500 to government, L.E 900 to
G. Goods in-transit of L.E 3000 not yet included in the stock
attend
REQUIRED:
Determine tax base on partnership profit
Question (6):
ABC firm began its operations on January 1,2006, and its
accounting period ends on December the firm purchased some
Computers
 On June 1,2006, at cost of L.E 20000
 On May1,2007at cost of L.E 6000
 On March 1,2008 at cost of L.E 1000
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Required:
Compute the taxable depreciation expense deductible
through 2006 till 2008.
Question (7):
An individual purchased a patents for some products as
follows:-
 L.E 30,000 for the patent of product (A)on first march 2008.
 L.E35,000for the patent of product (B)on first July 2008
If you learn that :
 He sold the patent related to product (A) at the end of June
2009 at L.E 32,000.
 He prepare his accounts on 31,Dec. of every year.
Required:
Compute the tax depreciation that must be considered as
deductible costs for the year 2008&200.
Question (8):
If a specific business prepares 1ts ending financial
accounts at Dec.31the business had the following transaction in
2007:
 On March15, purchased new machines for L.E 8000
 On June15, purchased used machines for L.E 12000
 On November 30, sold machines for L.E 3000
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If you learn it the beginning of machines at 1 January 2007

was L.E 20000 and the machines was used through the year
2007
Required:
Compute the taxable depreciation expense for the year 2007.
Question (9):
The profit and loss a/c for the year ended 31/12/2009
shows the net profit of L.E50000 On tax examination. the
following facts were revealed:-
i. Salaries included L.E 10000 salaries of last year but settled
this year
ii. Depreciation included L.E 1000 normal depreciation A
new machine was purchased and used in production this
year its cost was L.E 4000
iii. Advertising Expenses include L.E 12000 huge campaign
for 4 year starting this year.
iv. Donations consisted of L.E 500 to government, L.E 900 to
v. General Expenses included L.E 1400 insurance against
fire. And L.E 400 a deposit for governmental bid
vi. The cost of ending inventory recorded was L.E 4000 its
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actual cost was L.E 9000 and its selling price was L.E
13000(the firm used to determine inventory value based on
the cost or selling price whichever is lower)
vii. 10,000 provisions for doubtful accounts
REQUIRED:
Determine tax base on partnership profits (comment on
your answer).
Question (10):
The net profit of ABC firm amounted to L.E 120,000 for
the year ended on Dec.31.examining the firms books revealed the
following:-
 There were sales made on 28 of December, received by the
customers on the same date with a value of L.E 25,000
entered on the 8 of January.
 The owner withdraw goods for personal use, the costs of
which was estimated at the amount of L.E4,000 which did
not appear in the books.
 Expenses included7,000 L.E loan to the employees.
 A new machine was purchased and used in production
starting from Jan.1,2006 its cost was 4000 the firm did not
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record any depreciation for that machine

Required:
Show the effect on taxable net profit
Question (11):
The net profit of company was 350,000 L.E.
1. The net profit of company was 350,000 L.E The expenses
was 62,000 L.E and it included donations
 13,000 L.E to an Egyptian governmental hospital.
 4000 L.E to Nasr social bank.
 5000 L.E donations promised to be paid during the next
year
 10,000 L.E donation to a governmental hospital outside
Egypt
 30,000 L.E donation paid to a charity institution.
2. The salaries of accompany amounted 80,000 L.E. this sum
included
 18,000 L.E salary of the owner.
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 7,000 L.E loan to the employees.

 6,000 L.E annual salary for the owners son. he actually
manages the firm (Equipment valiant managed s monthly
salary is 300 L.E)
 Anew machine was purchased it's cost 3000 L.E.
 The remaining is the staff members' salaries.
Required:-
Show the effect on taxable net profit
Question (12):
The profit and loss a/c for the year ended 31/12/2009 show
the net profit of L.E 100000 On tax examination, the following
facts were revealed:
[9] Salaries included L.E 8000 to the firings owner for
management &L.E 20000 for employees.
[10] Commissions include L.E 5000 to owner for profitable
transaction.
[11] Advertising expenses include L.E 1500 for 3 years.
[12] General Expenses included 10000 interests on capital
[13] L.E5000 reserves for doubtful accounts
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[14] Donations of a value L.E 30000 includes L.E 20000 to

Cairo university, L.E 9000 to recognized charities and L.E
1000 to poor individuals
[15] The inventory of a value L.E 2000 was not recorded
Required:
Determine tax base on partnership profits
(Comment on your answer)
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Chapter Three: Value Added Tax
The value added Tax
97
98
First: Introduction:
History of value added tax development
The commodities taxes duties in the Arab republic of Egypt

developed from a production tax to a consumption tax then into
the general sales tax then it became a value added tax if it is
extended to the various production and distribution stages.
First stage : The production tax:

Egypt started imposing production duties since 1921 when
the State imposed a production duty on alcohol. The range of
these duties then expanded successively, in addition to imposing
consumption duties on imported commodities similar to those on
which production duties were imposed. As a result, the
provisions regulating the production duties and consumption
duties were dispersed and scattered, which led in turn to a
disparity in the bases and rules that regulate or govern these
duties.
Second stage : The consumption tax:

In 1981, the first fiscal legislation was issued to assemble
production and consumption duties in one tax, which was called
the consumption tax. This was by law No. 133 of 1981, and its
consequential amendments. Yet, the practical application of the
99
consumption tax revealed the existence of several problems and

loopholes, the most important of which are:
[1] The variety of methods of calculating the tax on different
commodities, as more than one criterion was adopted in
calculating that tax, using the unit as a basis for the
calculating the tax on some commodities, and a
percentage of the value of the commodity as a basis for
calculating the tax on some other commodities.
[2] The diversity of tax rates and its multiplicity, which range
11 between 2% and 50 % on local products, and between
1.95 % and 32.5 % on imported commodities.
[3] Some locally produced commodities were subjected to tax
rates higher than the imported ones. This resulted in
creating unfair competitive circumstances in favor of
imported commodities.
[4] The existence of a duplication in the payment of tax, the
tax is paid on parts included in the production of the end-
commodity, in addition to the end-commodity being
charged with the imposed tax.
[5] The tax becomes due upon withdrawal of [lie commodity
from the stores and prior to actual sale. This led to creating
confusion when determining the incident originating the
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tax, and to several complaints from the tax-payers.

[6] The payment of the tax every ten days created several
problems and procedures which overburdened the tax
payer, in addition to complications in dealing with the Tax
Administration.
Third stage : general sales tax :

A general sales tax was imposed by law 11 of 1991. In law
11 of 1991, the legislator endeavored to avoid the, defects and
problems which accompanied the application of the consumption
tax especially the following:
i. The sales tax becomes due upon the completion of sale of
the commodity subjected to tax, not upon withdrawal from
stores as was the case with the consumption tax.
ii. Authorizing the tax-payers to deduct the paid tax on their
inputs from the tax due on their sales as well as deducting
the tax on the sales returns, with the aim of avoiding
duplication existing under the consumption tax system.
iii. The imposition of the general sales tax on the imported
commodities in such a way as to achieve fair competition
with local counterparts in order to activate and encourage
local manufacturing.
101
iv. There are tax-exempted commodities and others subjected

to the tax at a reduced rate (5 %), others subjected to the
tax at an average rate (20%), and others subjected at a
high-rate tax (30%), in addition to a general tax rate of
(10%).
v. The form of presenting the tax declaration to the sales tax
administration, includes, the tax payable after deduction of
the tax during the thirty days following the Accounting
month, instead of the consumption tax system which
dictated payment every ten days.
Fourth stage : value – added tax :

Executive summary Egypt issued VAT Law no. 67 of 2016 on 7
September 2016 in the Official Gazette to be effectively applied
from 8 September 2016.
First: Application of VAT in three stages as follows:
The first stage : in which the industrial producer, the
importer and the provider of service shall be requisitioned to
collect the tax and pay it to the tax administration.
The second stage : in which the industrial producer, the
importer and the provider of service shall be, in addition to the
wholesale trader
102
The third stage : in which the industrial producer, the

importer, the supplier of service, the wholesaler and the retailer.
This tax shall be considered, after having completed the
application of its three stages, a tax on the value added to the
commodity, as it is imposed on the amount of the increase that
occurs to the value of the commodity in each stage from
producer, to the wholesaler, to the retailer and to the end –
consumer
Example:
Assume that a certain commodity needs, for its production
, raw materials the cost of which amounts to L.E 300 , with the
producer of the commodity selling it to the wholesaler for the
amount of L.E 750 who sells it in return to the retailer for the
amount of L.E 1050 , with the retailer selling the commodity to
the end – consumer for L.E 1500 and on the assumption that 14%
is the rate required to calculate the tax due on the commodity .
We can arrive at the tax due on the commodity by using
one of the two following methods :
103
The first method:

The tax can be calculated on the amount of increase in the
value of the commodity in each and every stage as indicated in
the following table:
The stage The value added The payable tax
- Purchase of the raw -300 300 × 14 % = L.E 42

materials
- The commodity
transitional stage 750 – 300 = 450 450 ×14 % = L.E 63
from producer to
wholesaler
- The commodity 1050 – 750 = 300 300 × 14 % = L.E 42
transitional stage
from wholesaler to
the retailer
- The commodity sale 1500 – 1050 = 450 450 × 14% = L.E 63
stage to the end –
consumer
Total tax paid on the commodity in its different stages

= 42 + 63 + 42 + 63 = EGP 210
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The second method: the imposition of the tax on the sale

price of the commodity in each stage, while deducting the tax
previously paid in the preceding stages, as follows:
1) The tax which the producer must pay to the tax
administration , when selling the commodity to the due
tax which the wholesaler
VAT = 750 × 14 % = L.E 105
(-) the tax on the components of the raw
materials = 300 × 14 % = L.E 42
the due tax which the producer must pay (105 - 42) = L.E 63
2) The tax which the wholesaler must pay to the tax
administration , when the commodity moves from the
wholesaler to a retailer :
VAT= 1050 × 14 % = L.E 147
( - ) the tax in the previous stage ( L.E 63 ) and the tax on the
components of the raw materials (L.E 42 )
The due tax which the wholesaler must pay =(147-63-42 ) =
LE 42
3) The tax which the retailer must pay to the sales tax
administration , when selling the commodity to the end
– consumer :
105
VAT= 1500 × 14 % = L.E210

(-) the tax paid in the previous stage
( 42 + 63 + 42 ) = L.E. 147
the due tax which the retailer must pay LE63
Hence , the total sales tax paid on the commodity at different
stages = 210
( 42 + 63 + 42 + 63 ) , which is the same result arrived at by
adopting the first method
Second: The Characteristic of the value added tax:

* General Tax
Imposed on all commodities and services whether capital or
consumables goods, local or imported, except the list of
exempted goods and services by law.
* Multiple Tax
Imposed on producers , wholesalers, retailers, importers. The
law permits the deduction of tax which has been deducted
before (earlier stage).
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* In Kind Tax
This kind of tax doesn’t take into consideration the social status
of the tax payer, expect essential products such bread,
sugar….
* Ad-Valorem rate Tax
Imposed on certain percentage from the commodity’s price or
service
* Actual basis Tax
Imposed on actual value of commodities and services
* Monthly paid Tax

A monthly return should be filled for the VAT due within two
months following the tax accounting month.
* Territorial Tax
Imposed on the commodities and services sold or rendered within
the territories of Egypt.
Third: The scope of value added tax:

All local and imported goods and services are subject to VAT,
except a special list contains 57 goods and services specified by
law, as example:
107
• Tea, sugar and milk

• Gas, electricity and water
• Banking services .
• Medicines (local or imported) and active substances used
in manufacturing.
(A) Locally manufactured or imported commodities:
The value added tax shall be imposed on all commodities
locally manufactured or imported,
(1) In relation to the commodities which are locally
manufactured, the sale occurrence is considered as the event
originating the Tax, It is not a precondition for the
realization of tins occurrence to pay the price of the
commodity in full, or to have its property transferred from
the seller to the purchaser. It only suffices of the tax to fall
due to issue the respective invoice, or to deliver the
commodity or to pay a part of its price.
(2) As for imported commodities, the Tax is imposed thereon
upon completion of the custom clearance of these
commodities, this tax is also due upon the first sale of these
commodities by the importer, In this case, the importer shall
have the right to deduct the tax previously paid upon custom
108
clearance from the tax that fall due upon first sale, the
commodities which are received in free market zones, as
well as the services rendered.
 The tax is due on whatever commodities received and
services rendered, and subjected to the tax according to
the provisions of this Law, in free market zones for local
consumption inside these locations and places. Also
imports for trading purposes inside the free zones are
considered as local consumption.
 The tax falls also due on whatever is imported in terms of
commodities or services subjected to the tax according to
the provisions of this law from free market zones, into the
local market inside the country.
 The tax does not fall due on whatever is imported by
projects existing inside free market zones regarding those
commodities or services that are needed for the practice
of the authorized activities inside those areas, with the
exception of passenger-cars.
 The tax does not fall due on the transit commodities
provided that transportation would be effected under the
control of the Customs Administration.
(B) Exported commodities:
A ( zero )VAT rate on exported commodities and services.
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(C) The taxable services:

Value added tax is imposed on services as examples:
-Hotels and tourist restaurants services.
-Tourist transport services.
-Telex and fax services.
-Air conditioned inter – governorates transportation (railways –
buses).
-Services related to setting up the sound and light shows.
-Services related to using the faculties of sound and light
companies.
-Services of artistic agents for organizing public or private
shows.
Fourth: The base of determining the tax bracket:

-The general value that should be declared as the amount subject
to VAT for goods and services is the amount actually paid or
payable by any means of payment.
-The value subject to VAT for locally used goods is 30% of the
sale value, without applying the deduction rules provided in
Article no. 22 of the VAT law, on the condition that the goods
should be used for a period of not less than two years.
-With respect to installment sales, the value subject to VAT
should include the installment interest exceeding the credit and
110
deduction rate announced by the Egyptian Central Bank on the

date of sale.
-The value subject to VAT for Schedule goods and services
subject to the Schedule rate and VAT is as follows:
• Local goods and services:
Actual purchase amount paid or payable amount + Schedule tax
amount.
• Imported goods:
Customs duty value + Customs duty + Schedule tax + any other
imposed taxes or fees.
• Imported service:
Actual paid amount + Schedule tax.
The VAT taxable amount includes:
•The amount paid by the purchaser or the service recipient.
• All related expenses spent as commissions, packing, stacking,
transportation, insurance, charged by the seller to the purchaser
or importer.
In the case of related party transactions, the sale value should be
according to arm’s length standards
111
Fifth: VAT Rate:

 The general VAT rate is 13% for the fiscal year ending 30
June 2017. From 1 July 2017, the general VAT rate
increases to 14%. Machinery and equipment used in
producing taxable or non-taxable goods or rendering
services are subject to a 5% VAT and exported goods and
services are subject to a zero VAT rate.
 Special rates apply to a number of goods and services
listed in Schedule (1) of the VAT Law, as follows:
 Goods and services subject to the Schedule rates only.
 Goods and services subject to the Schedule rates and the
VAT general rate, with a right to deduct the input VAT in
the application of VAT at general rate.
Sixth: Registration Threshold:

- Each natural person or legal entity selling goods or
services subject to VAT whose gross sales of taxable and
exempted goods and services equals or exceeds
EGP500,000 (approx. US$56,000) within the 12 months
preceding the date of the VAT law enforcement, is
obligated to register with the Egyptian Tax Authority
(ETA) within 30 days from the date of the enacted law.
112
- A natural person or legal entity, reaching or meeting this

threshold after the enactment of the VAT law is obligated
to register within 30 days from the date of reaching the
VAT registration threshold.
Example:
A tax –payers has drawn up an invoice for the amount of l.
e 8,500 for the value of the commodity plus L.E 300 installation
and transportation expenses and L.E 800 for maintenance
expenses undertaken by the seller ( the value added tax rate is 14
%
Required: Calculate the value added tax
The taxable value = 8,500 – (300+800) = L.E7400
Tax due = 7400×14% = L.E 1036.
 In case the tax-payer sells the taxable commodity at the

outlets of distribution attached to him, then the taxable
value shall be the value of his sales calculated at wholesale
price.
Example:
There has been a sale of 3,000 units of item (A) throughout
the sale outlets attached to the company at the price of L.E 70 per
unit. The sale price of the unit to wholesale is L.E 60 (the sales
113
tax rate is 10%).

Required: Calculate the value added tax
Solution :
The taxable value = 3,000 × 60 = L.E 180,000
The tax due = 180,000 × 14 % = L.E 25200
It takes into consideration the commercial discounts (such as the
commercial discount, and the quantity discount) and the cash
discounts when determining the tax bracket, while effecting the
necessary adjustments.
Example:
A commodity has been sold by a registered seller for the
amount of L.E 7000, with a commercial discounts of 10% and a
cash discount 2 % for immediate payment. (The value added tax
rate is 14%).
Required: Calculate the value added tax.
Solution:
The commercial discount = 7,000 × 10 % = L.E 700
The price of the commodity after exclusion of the
commercial discounts = 7,000 – 700 = L.E 6,300
The cash discount = 6,300 × 2 % = L.E 126
The value of the taxable commodity = 6,300 – 126
= L.E 6,174
The tax due = 6,174 × 14 % = L.E 864.36
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Concerning the imported commodities, their value shall be

determined in accordance the law on basis of the value on which
custom duties are imposed plus the custom duties, according to
the following:
The tax bracket on the imported commodities = the value on
which the custom duties are imposed + custom duties + any other
duties imposed on the commodity
Example:
The value of a commodity imported from abroad
amounted, according to the custom procedures certificate, to L.E
60,000 (CIF). The custom duties on this kind of commodities
amount to 30%.
( the value added tax rate is 14 % )
Solution :
Custom duties = 60,000 × 30 % = L.E 18,000
The value subjected to the sales tax
60,000 + 18,000 = L.E 78,000
VAT = 78,000 × 14 % = L.E 10,920
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The following should be taken into consideration when

determining the actual value of imported commodities:
1. Concerning imported commodities which are fully
exempted from custom duties, their value is determined on
basis of the CIF value only.
2. Concerning imported commodities which are partially
exempted from custom duties, their value is determined on
basis on the unexampled portion.
3. Taking due account of discounts on value of the imported
commodities when determining the tax bracket.
As for services, the tax bracket is determined on basis of their
actual value as indicated in the excluding any other duties or
taxes.
Example:
The value of services rendered by one of the hotels
amounted to L.E 50,000 noting that the service charge is 10%
and the general sales tax rate is 14 %.
Required : Calculate the tax
116
Solution :
The service charge = 50,000 × 10 % = L.E 5,000
The value of the invoice (value of service + service charge)
= 50,000 + 5,000 = L.E 55,000
The sales tax = 55,000 × 14 % = L.E 7700
which are taken as a basis for the tax assessment. Amongst
the most important of these commodities are gold, silver,
gemstones, sweets and wooden furniture. For in the field of the
wooden furniture.
Seventh: Tax deduction:

Input tax is the VAT incurred or charged to the registrant upon
purchasing or importing goods and services, including machinery
and equipment, whether directly or indirectly related to the sale
of goods and services subject to VAT.
When calculating the tax, the following should be deducted
from the tax due on the sales value:
• Tax paid or accounted for returned sales
• Tax charged on inputs including the tax charged to the goods
and services sold by the registrant through all distribution phases
according to the conditions and situations that will be provided
117
by the executive regulations relating to the VAT law Items not

entitled to tax deduction include:
 Schedule tax whether goods and services subject to this tax or
inputs of goods and services subject to this tax.
 Input tax included in the cost items
 Exempted goods and services
Other word ,when paying the tax due, to deduct what was
paid before, or included 'n [he sales returns and what has been
previously borne in terms of a tax on the inputs as raw materials
entering in the production of the commodities subjected to tax.
The following is to be taken into consideration :
a - Concerning sales returns:

 It is authorized to deduct the tax which was previously
paid on returned commodities.
-The returned commodities must be actually received and entered
the regular books of the registered party, and value
refunded to the purchaser including the taxes, or recorded
in his account.
-The register party issues a debit or credit advice duly dated,
serially numbered, in which shall be indicated all the
details related to the seller and purchaser, such as the
name. Address, number and date of the original invoice,
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and the description of the tax which must be debited and

credited.
Example:
Suppose that sales of product (A) during the month of
January was 300 units to customer (X) and 400 units to customer
(y) at a price 100 L.E./ unit, he presented his tax declaration to
the tax department including the quantity of safes and paid the
tax due which was 9800 L.E. at a rate 14% of safes price,
customer (X) returned 30 units because it was not in accordance
with the specifications in February, knowing that safe of product
(A) during February was 400 units.
Required: Calculate the tax due in February.
Solution:
Tax an retuned units

= (400 x 100 x 14%) – (30 x 100 x 14%)
= 5180 L.E.
b - Concerning inputs:
If all the sales of the registered party during the fiscal period are
subjected to sales tax, then he is •authorized to debit the tax
that has been previously paid on the inputs of those
commodities which were locally manufactured, provided he
holds the tax bills previously paid.
119
As for imported commodities, the registries party is allowed to

deduct the tax paid on inputs according to the details of
custom procedures certificate.
Example:
A company imported goods at a value 250,000 L.E.
customs duties were 50% VAT was 14%. Sales value of the
company was 400,000 L.E., tax rate is 14%.
Required: Calculate tax due.
Solution:
VAT = 400000 x 14%=56000.E.

Tax base = CIF + custom duties
= 250,000 + 125,000= 375,000 L.E.
Tax due = 375,000 x 14% = 52500 L.E.
Sales tax to be paid = VAT – import tax
= 56,000 – 52500= 3500 L.E.
- If some of the sales of a registered party, whether locally
manufactured or imported, are subjected to tax, while
some others are not, the registered party shall be
authorized to deduct the tax on the inputs in relation to the
part that is subject to tax only.
- If the registered party had deducted the tax on the inputs of
tax-free commodities in previous declaration, a credit
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advice shall have to be drawn for this tax.

- If the value of the tax which was previously charged to
inputs is more than the value of tax, the registered party is
entitled to deduct the amount the increase from the tax due
on sales of future periods.
 Tax resulting of amendment in the value:
in addition to the foregoing, there may be an amendment in the
value of the deal or the transaction which was concluded between
a registered seller and a registered purchaser, and for which the
tax was paid - In such case, tax declaration of each of the seller
and the purchaser should be amended in the following month
.that the treatment should take place as follows:
- If the value of the deal or transaction has been amended by
in increase, the seller shall add the increase in the tax by a
credit advice to the Tax Administration, with the purchaser
debiting the tax due on his sales as tax refund.
- If the value of the transaction or deal has been amended by
a decrease, the seller shall deduct from the tax due on his
sales, with the purchaser adding the decrease in tax by
credit advice to the Administration, in his declaration.
121
Example (1):
Suppose that a wholesaler bought a product for 1100L.E.
including 100 L.E. VAT. The expenses to sell this product
amounted to 500 L.E. The product is sold on the basis of cost +
20% profit margin.
Required: Determine the VAT and show the effect of tax on
imputes.
Solution:
A) In case applying discount (deduction)
Product cost = 1000 + 500 = 1500 L.E.
Selling price= 1500 + (1500 x 20%) = 1800 L.E.
Value added tax on retailer = 1800 x 14% = 252L.E.
Total selling price = 1800 + 252 = 2052 L.E.
Value added tax due on the wholes= VAT –tax on input
= 252 – 100=152 L.E
B) In case of not applying discount (deduction):
Cost of the product = 1000 +100+500=1600 L.E.
Selling price = 1600 + (1600 x 20%)
= 1920 L.E.
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Sales tax on retailer = 1920 x 14% = 269 L.E.

Total selling price = 1920 + 269 = 2189 L.E.
In this case the scales tax due on the wholesaler in
269L.E.without deduction of what has been paid as sales
tax on input.
Example (2):
Suppose that (A) bought materials of a value 1000 Kg at a
price 15 L.E./Kg and paid VAT 14%. He used this quantity to
produce product (X) subject to tax 14% and its quantity is 100
units at a price 60 L.E./Unit and product (Y) exampled from tax,
its quantity 200 units and sold at a price 40 L.E./Unit.
Required: Determine Value added tax due.
Solution:
% of product (x) sales and subject to tax

Units Subject to Tax 100 1
  
Total Units 300 3
tax on inputs =1000 x15 x14% x1/3=700L.E.
Tax on sold units = 100 x 60x 14% = 840 L.E.
Tax due = 840 – 700 = 140 L.E.
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Eighth: Tax Refund:

"The tax shall be refunded according to the terms, conditions and
limits indicated by the executive laws in time-limit within 45
days from the date of presentation of the application supported
by documents in the two following cases:
a – Tax refund on exports:

Exports are subjected to VAT at (zero) rate. The legislator
authorized the refund of the tax previously collected on the
exported commodities, whether exported as they are or whether
included into another commodity.
The terms and conditions of the refund of the tax on
exports as follows:
1-The commodities must not be previously used.
2-The commodity or service subjected to tax is exported
according to normal custom procedures, and by the Tax
administration Knowledge.
3-All supporting documents of the export operation should be
attached to the refund application, together with the tax
invoice.
4-The refund is out of tax previously collected, at the same
category and value prevailing at payment time, and on
what had actually been exported.
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5-The refund of tax previously collected for exported

commodities shall be affected by the Custom
Administration, by debit to the Tax Administration
account.
6-Presenting the documents related to payment of VAT which
required for refund, for example , original of tax invoices,
copy of custom declaration
7-Deposit the proceeds of exports in one the banks under
supervision of the central bank, according to the
regulations which stated by the bank, conditioned that
export proceeds are not less the input value of the
commodity.
b - The refund of tax wrongly collected:
The following are conditions for the refund of tax which
was wrongly collected:
1. The tax-payer shall submit an application to the Tax
Administration indicated the amount of tax erroneously
collected.
2. All supporting documents of the claim should be attached
to the application.
3. The application shall be examined by the Tax
Administration, in the light of which the tax shall be
refunded.
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Ninth: Services Rendered by a Nonresident Person

(Reverse Charge):
-If a nonresident person (both natural and legal), not registered
with the ETA renders a service subject to VAT in Egypt, to a
person not registered in Egypt:
This person is obligated to appoint a representative or an agent
in Egypt to fulfill all the obligations due on the nonresident, as
provided by the law including registration, payment of VAT, the
additional tax and any other taxes due according to the VAT
law.
-If the nonresident party does not appoint a representative or
agent in Egypt then the Egyptian resident receiving the service
is obligated to remit the VAT and any other tax due according
to the VAT law to the tax authority without breaching his right
to reimburse the tax payments made from the nonresident
vendor.
-If a nonresident person, not registered with the ETA renders a
service to a VAT registrant not necessary for their activity, to a
governmental entity, a general authority, or an economic
authority:
-Then the service recipient should account and remit the VAT
due to the ETA within 30 days from the date of sale in case the
126
nonresident party does not appoint a tax representative or

agent on his behalf.
-VAT registrants who import a service necessary for their
VAT taxable activity are considered as an importer and a
supplier of the said service at the same time.
-In case the VAT is not paid within the legal deadline, an
additional tax will be payable with and through the same
procedures of the original tax payment.
Tenth: Imported Commodities
1. Perform Imported Services by a Resident in Egypt
The service in this case is considered as a local service (and not
an imported). As long as the performer of this service is resident
in Egypt, it is necessary to register for the authority and collect
and supply the tax owed to that service and to acknowledge it. If
he does not do so, he will be considered a tax evader and will be
subject to the penalties and sanctions imposed on tax evasion,
which we have explained above. In this case, the tax shall apply
to such services regardless of the payment of the value thereof
or not, the fact that the establishment of the tax is the
performance of the service actually in Egypt.
2. Perform imported service by a non-resident in Egypt:
The VAT registrant who paid the VAT due on the services
received from a nonresident person is entitled to deduct this
127
input tax if all conditions and rules stated in Article no. 22 of the
law are fulfilled he value of the imported services in this case is
subject to tax in Egypt as follows:
 If the recipient is a resident and unregistered in the
authority, the service provider is obliged to appoint a
representative or agent to register, collect and supply the tax
and to declare it on legal dates. If he does not do so, the
recipient of the unregistered service shall have to pay the tax
with his right to return to the non-resident service provider.
 And if the recipient of the service registered in the

authority and service is not required to engage in activity ,
or Governmental entity or local entity or economic entity or
any other entity, the service recipient is obliged to calculate
the tax owed to it and to pay it for the authority within 30
days from the date of sale in case the service provider (non-
resident or non-registered person) appoints a representative
or agent in Egypt, and shall not be entitled to deduct such tax
as the service is not related to the taxable activity.
 And if the recipient of the service registered with the

authority and service required to practice its taxable
activity, it is treated as an importer and performer of that
service at the same time. In the sense that it is committed to
128
all the obligations imposed on the importer of the service

and is to acknowledge the value of the imported service in
the history of its performance in Egypt (and not within 30
days as in the case of the registered recipient of the service
is not required for its activity), and the payment of the tax
due on the dates specified by law. If he does not do so, he is
considered a tax evader.
On the other hand, the recipient of the service shall comply with
all the obligations imposed on the service provider, and shall be
entitled to deduct this tax relating to his activity from the tax
values derived from this activity.
Example:
Required: Statement of tax treatment for tax purposes on the

value added in the following cases:
- An Egyptian company contracted with a foreign company

abroad to install machines and equipment imported by its
user in its activity for the amount L.E 40,000 of that on 1st
January 2017, noting that the products of the Egyptian
company are exempt from tax and the conversion rate of
the dollar is L.E 10.
129
- An Egyptian company registered for the authority to obtain

a service is not required for its activity from a foreign
company abroad has no agent in Egypt, in exchange for
30,000 dollar payment on January 1, 2017 note that the
conversion rate of the dollar is L.E 10.
- An Egyptian company registered for the authority on

January 1, 2017 contracted a foreign company to use its
distinctive brand for its products for L.E 90,000 in the
year, note that the foreign company does not have
representative or agent in Egypt, and that the tax obtained
on the sales of the Egyptian company bearing the
trademark has reached L.E 27,000 and that the price of the
dollar is L.E 10.
The solution
1) The two cases are divided:
a) If I have a company located abroad (a non-resident)

representative or agent in Egypt registered with the
authority, the company committed the recipient service to
pay the tax and the amount of:
40,000 dollar × L.E 10 × 14% = L.E 56,000
130
Because the company receives the service free of tax, the tax paid
by the knowledge is one of the elements of the cost of machinery
and equipment. For its part, the representative or agent of the
foreign company committed to issue a tax invoice including the
tax collected with payment of this tax by January 2017.
b) If I have not a company located abroad ( a non-resident)

representative or agent in Egypt, the Egyptian company
has committed the service recipient to pay the tax due for
these services and its value is L.E 30,000 on the date of
the end of the service delivery in Egypt and in case of
failure to do so and discovery by the authority in the
examination Income Tax The Company shall be liable for
the payment of the tax due and the additional tax and shall
have the right to take the collection procedures, including
the administrative seizure of the company.
2) Since the service provider is not resident in Egypt and has
no agent registered in Egypt, the Egyptian company shall
be responsible for the payment of the tax due and
estimated: 30,000 dollar × L.E 10 × 14% = L.E 42,000 On
the first of January 2017, and within 30 days ending on 31
January 2016, and shall not be entitled to deduct such tax
as it is not required for its taxable activity.
131
3) Since the recipient of the service (the Egyptian company)

registered with the authority, and that the service
required to practice its taxable activity, it is obliged to
pay the tax due to the right of use and the value: 90,000
dollar × L.E 10 × 14% = L.E 126,000, of the approval in
January 2017, On the other hand, he is entitled to the
value of the tax paid from the tax value owed to his sales
bearing the trademark paid for. And since the tax
collected on these sales has reached L.E 15000, and that
the tax paid on the right of use is equal to L.E 42000, and
therefore the company is entitled to carry the balance
remaining without deduction of the amount 126000 –
27000 = L.E 99,000 of credit is exhausted in the
following statements.
Eleventh: Commodities that are graduating from

Free Zones and Cities
The taxable value of goods that are exported from free zones and
cities shall be determined as follows:
A. If these goods are imported abroad for the purpose of

trading in them or domestic consumption within the
free zones and cities, they are subject to tax when they are
132
exported to the local market inside the country on the basis

of the value of the customs taxes due to them on this
occasion. Due to the fact that they were already taxed
when they arrived in free zones and cities on the basis of
their import cost alone.
B. If these goods are manufactured in free zones and

cities, they are subject to tax when they are exported to the
country on the whole value of the goods regardless of the
nature of their components (foreign or local), plus the
customs tax due and other taxes and levies imposed.
Example:
One of the commercial establishments in Moscow purchased 300

units of imported goods (A) at a unit price L.E 500 at a discount
2% from one of the establishments operating in one of the free
zones.
If you know that the commodity is not of the goods subject to the
tax schedule and the rate of customs tax at the customs port
30%,and the rate of tax value added 14%,Required: Calculate the
value of the value added tax value when the exit of this
commodity from the customs port.
133
The solution:
The value added shall be calculated when the goods are exited
from the customs port as follows:
- Determination of the total Tax:

It is represented in the customs tax alone and is equal to:
300 units ×L.E 500 × 98% × 30% = L.E 44100
- Determination of the required tax:

The tax due= 44100 × 14% = L.E 6174
Example:
One of the industrial facilities established in the free city in Port

Said sold some of its manufactured goods to one of the
commercial companies in Cairo in the amount L.E 50,000, If you
know the following:
a) The foreign component of these commodities accounted
for 40% of their value.
b) The goods are not among the goods subject to the tax
schedule.
c) The rate of customs tax is 20% and the rate of value added
tax is 14%.
d) Fixed support fee is 2%.
134
Required: Calculation of the value of the value added tax due

when the goods out of the customs port in Port Said.
The solution:
The value added shall be calculated when the goods are exited
from the customs port as follows:
1. Determination of total tax:

The value of commodities (foreign and local) = 50,000
Customs Tax 50,000 × 20% = 10,000
Support fee 50,000 × 2% = 1000
The total tax = L.E 61,000
2. Determination of the required tax:
The tax is due = 61,000 × 14% = L.E 8540.
Fifth Stage: Schedule Tax Settlement:

 The characteristics of Schedule Tax
The schedule tax according to the provisions of the law No. (67)
for year 2016 is characterized by several characteristics, the most
important of which are the following:
135
1. Specific Tax
They are imposed on certain goods, services, consumption
or capital, local or imported, which are specified in the
schedule attached to the law No.(67) for year 2016.
Therefore, goods and other services not included in this
schedule are not subject to this tax.
2. Not Multiple Tax

They are imposed on goods and services designated once
at the first sale (if local) or upon customs clearance (if
imported). It may not be imposed again if the multiple
stages of circulation in the local market, unless there is a
change in the case of the commodity.
3. In-Kind Tax
They are focused on the goods and services assigned to
them without regard to the personal circumstances of the
consumer.
4. Multi-Rate Tax
It is sometimes imposed at a percentage of the price of the
commodity or the services subject to it (average value),
and sometimes other fixed amount on the unit of the
commodity (ton - kilo-gram-meter-liter ...) regardless of its
value ) qualitative value). And there are certain goods
136
imposed by the tax value and value at the same time, i.e. a
percentage of the price of sale and at a certain value as a
minimum, depending on the type of the product or service.
5. Actual Basis Tax

They are levied on amounts collected from the buyer or
service recipient. However, his tax interest is entitled to the
assessment of that tax in cases where the registrar does not
comply with the tax return within the time specified by the
law.
6. Monthly-Paid Tax
The seller or the service provider is obliged to submit a
monthly declaration specifying the value of the tax and his
obligation to pay. He is obliged to pay this tax to the
interest within the time specified for submitting this
declaration.
7. Do not Allow to Deduct Input Tax

The schedule goods and services do not enjoy the deduction
of the input tax. However, the Egyptian legislator
sometimes allowed the tax deduction of the previous
schedule to be paid for its goods when used in the
137
production of other items in the Schedule by deducting

from the tax the due schedule.
For example, it is possible to deduct the schedule tax paid to
tobacco (raw smoke) imported when using this tobacco in
the production of other items in the Schedule, such as
cigarettes and cigars. It is also possible to deduct the
schedule tax paid for vegetable oils when used in the
manufacture of hydrogenated vegetable oils (industrial
fungus) and from the tax due to this process.
The tax paid on machinery, equipment and spare parts used
in the production of goods and services subject to the
schedule tax may also be settled by deducting from the
value of the tax of the schedule within the limits of the due
date until it is depleted.
8. Territorial Tax
They are imposed on the goods and services concerned
with the schedule when they are sold or when the services
are performed, within the borders of Egypt, so it does not
apply to the goods and services that are exported
The tax deduction system confirmed in the tax shall not
apply to the value added to schedule tax either on goods or
138
services either by itself or as inputs into goods or services

subject to tax.
The tax deduction of the tax shall be considered in whole or
in part, without prejudice to the provisions and limits of the
deduction, the taxpayer shall be punished by imprisonment
for a term of not less than 3 years, not exceeding 5 years,
with a fine of not less than L.E.5000 and not exceeding
L.E.50,000 or one of these two punishments.
 However, the legislator allowed the schedule tax
settlement in the following cases:
1- The tax on the proceeds of sales of the goods listed in the

schedule facilities for the law, and this under the following
conditions:
a) The returned goods have already been received in
the condition in which they were sold and not be
damaged or expired.
b) The customer may have already paid the schedule
tax on the returned goods.
c) The Registrar shall issue a notice of deduction /
addition dated and shall bear a serial number in
which the data of both the seller and the buyer shall
be recorded.
139
2- The tax paid on the parts of machinery, equipment and

spare parts used in the production of goods and services
subject to the schedule tax only, where the registrar is
allowed to settle the deduction of the value of the schedule
tax amount due within the limits of the receivable until
depleted.
3- The previous schedule tax is paid on the schedule goods
when used in the production of other items in the schedule,
where in certain cases allowed schedule tax due to the
local product that enters the goods in the composition. For
example, the tax on tobacco (raw smoke) is allowed to be
deducted when the tobacco is used to produce other items
in the schedule such as cigarettes, molasses, jujube and
cigars. It is also allows to settle the schedule tax payable
on vegetable oils when used in the manufacture of
hydrogenated vegetable oils (industrial fungus) and that of
the tax due to this process.
4- The previous schedule tax is paid by the subcontractor,
where the schedule tax settled by the general contractor for
the same works shall be deducted from his tax.
5- Taxation of the schedule due to the passenger cars in the
possession of the registrar at the date of the law of value
added tax, where it is settled from the previous sales tax
140
paid for the same cars. The following conditions and

controls shall be observed:
a) Keeping regular books and records of accounting.
b) Possessing the assets of tax invoices or certificate of
customs procedures and delivery of the payment of the
general tax on sales by customs.
c) The inputs in the declarations of the periods in which the
purchase was made have already been acknowledged.
d) The value of the sales tax is not included in the cost.
e) In respect of sales proceeds, only the foregoing shall be
deducted from the tax on the returned goods.
Example:
He bought 30 liters of pure alcohol at L.E.12, then made it to
Cologne and was packaged in bottles worth L.E.1500, and then
sold it for L.E.3000.
If you know that the schedule tax is L.E.22.5 per liter, and that
the value added tax rate is 14%
Required: Calculate the value of the tax payable.
The solution:
Determine the value of the purchase bill:
The price of buying alcohol = 30 liters × L.E.12 = 360
(+) Schedule tax = 30 liters × L.E.22.5= 675
= Total value added tax = L.E 1035
141
(+) Value added tax (14%) = 144.9

= Total value of the bill = L.E.1179.9
Determining the value of the bill Selling Colonia:
Selling price = 3000
(+) Schedule tax (8%) = 240
= Total tax value added = 3240
(+) Value added tax (14%) = 453.6
= Total value of the bill = L.E.3693.6
Tax obligation to pay:
Schedule tax earned on sale (not deductible) = 240
(-) Value Added Tax:
453.6 Proceeds – 144.9 Paid for alcohol - 210 Paid on glass at a
rate of 14% = 98.7
= Tax payable = L.E.141.3
Example:
The owner of a car with capacity of more than 1600 cm3 before
the issuance of the law No. (67) for the year 2016 for L.E.700000
and then sold after the issuance of the law No.(67) in the amount
of L.E.800000 (without tax). If you know that the price of
schedule tax to sell the car 15% and that the rate of the value
added tax 14%, and the price of sales tax 30%.
Required: Calculate the value of the tax payable.
142
The solution
I. Determine the value of the purchase bill
The price of buying a car =700000
(+) sales tax (30%) =210000
Total development charge =910000
(+) development charge (5%) =45500
The price of buying a car =L.E.955500
II. Schedule tax settlement:

Sales tax =210000
(-) schedule tax
(Purchase price without tax sales×15%) =111825
Balance of sales tax =L.E. 98175
III. The payable tax:

Value added tax on sale price:
Sales price (800000×14%) =112000
(-) balance of sales tax =98175
The payable tax =L.E. 13825
Example:
One of the registered commercial shops sold 113 box of orange
juice at a total amount of L.E. 5650, including a schedule tax rate
of 8% and a value added tax rate of 14%.
143
Required: Calculate the value of the total tax to be paid

Solution
The tax is computed and its obligation to pay is as follows:
 VAT Value Added:
Selling price×(100/114)=5650×(100/114)=L.E
4956.14
 tax value added=4956.14×14%=L.E 693.86
 schedule tax:
The price of the sale after deducting the tax value
added×(100/108)=4956.14×(100/108)=L.E 4589.02
 schedule tax= 4589.02×8%=L.E 367.12
 The payable tax (693.86+367.12) =L.E.1060.98
6- The Cessation of the Work

The establishment or operation of any plant or plant for the
production of its goods or the performance of a service subject to
the taxable schedule or to the value added tax and the schedule
tax shall not be permitted except after obtaining a license from
the competent administrative body.
And shall be notified to the authority (Form No. 101), within a

period not exceeding 21 days from the date of occurrence of the
fact to be notified.
144
Each producer of goods or service providers of such goods and

services shall notify the authority by stopping the work of the
factory, plant or premises through which the activity is carried
out for any reason, whether in whole or in part, and shall notify
the authority immediately after the expiry of the period of
suspension (Form 102) and within 21 days from the date of
occurrence of the notified event.
7- Subjecting Product or Services to the Tax or Increasing the
Category Imposed on It
Subjecting the goods or services to the tax or increase the
category imposed on them, Importers, wholesalers, semi-
wholesalers, distributors and distributors are obliged to provide a
statement of interest to their existing balance of such goods or
services on the day before for the new schedule tax or more,
submission of this statement on (Form No. 123) within 15 days
of this date.
And shall be entitled to the new schedule tax or more at the date
of submission of this statement. The tax payable on these goods
and services shall be paid within the period specified by the
Minister of the authority, not exceeding six months from the date
of maturity.
The legislator considered that this is considered a tax evasion.
145
Example:
Required: Tax statement of each of the following with the
calculation of the amount of tax due in each case:
Bill mobile phone to one of the companies worth L.E.16000.
Abstract by a contractor to one of its clients approved by the
consultant engineer worth L.E.35000, note that the previous tax
paid by the knowledge of the subcontractor amounted to L.E.320.
Fees payable to one of the accountants amounted to L.E.50000,
he got L.E.35000.
Free services provided by a hotel for workers with a value of
L.E.18000.
The solution:
1-bill mobile phone
The services of telecommunications through the mobile network
of the services listed in the schedule annexed to the law, which is
subject to a schedule tax rate of 8% in addition to the value added
tax rate of 14%, as follows:
Schedule tax= 16000×8%=L.E. 1280
Value added tax= (16000+1280)×14%=L.E.2419.2
Total tax due=L.E.3699.2
146
2- Contractor's abstract
Contracting services, construction and building works are subject
to a table tax of only 5% of the approved value of the consultant.
The previous schedule tax shall be settled by the taxpayer's
knowledge of the tax paid by the general contractor for the same
business.
Accordingly, the schedule tax for this abstract is calculated as
follows:
The tax payable to the general contractor=35000×5%=
L.E.1750
(-) the previous tax paid by the subcontractor=L.E.320
Tax payable = L.E.1430
3 - Accountant fees
Professional and consulting services fees are subject to a
schedule tax only at the rate of 10% of the value actually paid for
the service, as follows:
The tax is due=35000×10%= L.E.3500.
4- Free services for hotel staff

The value of the free services provided by hotels and tourist
restaurants to their employees shall be subject to tax according to
the last paragraph of Article (5) of Law No. (67) of 2016, which
147
stipulates that "the sale shall be considered by the taxpayer to use

the goods or benefit from the service for personal consumption or
special use or disposition of any of the legal acts”.
Accordingly, the tax payable on the value of the free services
provided by the hotels to the employees shall be calculated as
follows:
The tax is due=18000×14%= L.E.2520.
Example:
The value of telephone calls made by a person during his stay in
a tourist hotel amounted to L.E.4000 as defined by the Egyptian
Company for Communications.
Required: Determine the total amount that the customer is

obliged to pay to the hotel in each of the following cases:
 Providing the hotel for service with the same tariff
as the Egyptian Company for Communications.
 Provide the hotel for the service by adding a profit
margin of 20%.
148
The solution:
1-Providing the hotel for service with the same tariff as the
Egyptian Company for Communications
Telephone services are subject to the value added of 14% of the

value of the invoices issued by the Egyptian Company for
Communications, Therefore, the charge for collection of this tax
is the Egyptian Company for Communications, which adds the
value of the tax on the value of invoices issued by all subscribers.
In case of providing the hotel for the service at the same price
specified by the Egyptian Company for Communications, for this
service subject to the tax rate of 14% as follows:
The tax due= 4000×14%=L.E.560
In this case, the hotel collects the call value from the process in
addition to the required tax, and the tax in this case is one of the
elements of the cost of the hotel service.
2- Providing the service with a profit margin of 20%
In this case, the service is subject to a tax rate of 14% as follows:

The tax due=
4000+(4000×20%)=4000+800=4800×14%=L.E.672.
149
In this case, the hotel collects the call value of a transaction of

L.E 4800 plus the required tax, and can deduct the tax paid to the
Egyptian Company for Communications equal to L.E.560 of the
tax collected by the customer which equal to L.E.672, which is
committed to pay the amount of L.E.112 to benefit Taxes.
Example:
During the month of February 2017, Al-Amal Transport
Company leased some of its cars to Al-Noor for tourist transport
for the sum of L.E 40000, then the Al-Noor company recently re-
leased these cars to others for L.E 45000.
Required:
Determine the total amount committed by the collection of both
the Al-Amal and the Al-Noor of tourism.
The solution:
It is subject to tourist transport services for the value added of
14%. Therefore, the leased tourism company collects the rent
value plus the added value tax, as follows:
1- Al-Amal Company:
The total amount to be collected is calculated as follows:
Value rent =40000
150
(+) Value Added Tax (14%) =5600

The total amount =L.E.45600
2- Al-Noor Company:
The total amount to be collected is calculated as follows:
Value rent =45000
(+) VAT added(14%) =6300
And is allowed to deduct the tax paid to the Al-Noor company
and therefore be committed to pay only L.E.700 to the tax
authority.
Example:
One of the real estate investment companies contracted with one
of the employed companies in mediation work to sell a number
of residential units at a price of L.E.200000 per unit for a
commission of 5%. If you know that the intermediary
establishment sold two units during the month of March 2017.
Required: Determine the total amount obtained by the real
estate investment company and Intermediate institution as a
result of this sale
151
The solution:
Exempt from the tax value added to the sale and lease of land
space and agricultural land and buildings and housing units and
non-residential operations.
Intermediary services are subject to a value added tax rate of
14%. The Broker shall be obliged to register for the tax authority
if his commission or brokerage reaches the statutory registration
limit for the taxable service operator (500000 L.E. or more) and
thus complies with the collection of the tax on his commission or
brokerage (from one or both parties) and supplied to tax authority
accompanied by his monthly approval.
This applies equally to both the appraiser and the banks if each of
them carries out mediations to sell real estate or cars. Both of
them are obliged to register for authority if their commission
reaches the statutory registration limit.
On this basis, the total amount obtained by the Real Estate
Investment Company and the intermediate establishment shall be
calculated as follows:
1-Real Estate Investment Company:
Selling price (2 units x 200000) = L.E.400000
(-) Broker commission (400000 × 5%) = L.E.20000
152
2 - Intermediate establishment:
Selling commission (400000 × 5%) = L.E. 20000
(+) Value added tax (14%) =L.E. 2800
The total amount =L.E. 22800
The intermediary establishment is obliged to supply the tax due

to the tax authority.
Example:
One of the car manufacturers has contracted with an office that
works for mediating the sale of a number of passenger cars with a
capacity of 1600 cm3 at a price of L.E 450000 for a car for a
commission of 10%. If you know that the office has sold only
two cars during the month of March 2017.
Required: Calculation the value of the tax, which is committed
by both the product and the office to supply them to the
authority.
The solution
The tax which the producer and the office commits to supply to
the authority shall be calculated as follows:
153
1-Product:
The price of the sale of cars is subject to the schedule tax (at the
rate of 10%) in addition to the value added tax (at a rate of
14%) with the deduction of the schedule tax of the value added
tax as follows:
a) Schedule Tax:
The tax = 2 cars × 450000 × 10% = L.E 90000
b) Tax Value Added:

The tax= (900000+90000)×14%=L.E 138600
c) The tax to be supplied =138600-90000=L.E 48600
2- Office Intermediary: The commission of the office is subject

to a VAT of 14% as follows:
The tax=900000×10%×14%=L.E 12600
 Tax Audit, Assessments and Appeals:

The ETA is only entitled to make deemed tax assessments for
the VAT, Schedule tax or to amend a tax return already
submitted unless this is based on available supporting
information/ documentation, and this shall be within a period of
five years starting from the tax return deadline according to the
law. This period extends to six years in the case of tax evasion.
154
This period is stopped by any of the statute of limitation means

provided by the civil law, a tax assessment notification, a
warning notification for payment or by transferring the case to
the appeal committees.
If the ETA amends or deems the tax, a notification is sent to the

VAT registrant via a registered postal courier or any electronic
means acknowledged by the Electronic Signature law or other
acknowledged means.
The registrant is entitled to appeal the amendment or deemed

assessment within a period of 30 days starting from the date of
receiving the ETA’s notification for this purpose.
The legal procedures for the appeal will continue as detailed in the
VAT law.
 Penalties, Sanctions and Offences:

An additional payment is due for each month or part of month
starting from tax payment deadline until the date of payment. The
additional payment is 1.5% of the unpaid VAT and the Table tax
amount including the tax resulting from amending the tax return.
155
i. Sanctions for breaching the law provisions set for

procedures set out in the law include:
• A penalty between EGP500 and EGP5000 (approx. US$56 to

US$560)
• Payment of the VAT, Schedule tax and additional tax
• Penalties to be folded if repeated within three years
ii. Tax Evasion Sanctions

• Prison terms from three to five years
• Penalty payment from EGP1,000 to EGP10,000 (approx.
US$112 to US$1,120)
• Payment of the VAT, Schedule tax and additional tax
• Sanction to be folded if repeated within three years
• Tax evasion considers person breaching honor and honesty.
The law requires among the documents submitted for tax
deduction or refund a certificate from a Chartered Accountant
confirming that the VAT registrant is entitled for tax deduction
or refund. The VAT law includes specific penalties if the
Chartered Accountant breaches the law in this regard. The
following will be charged:
• Ceasing the accountant from practicing his profession for one

year
156
• Penalty between EGP 10,000 to 50,000

• In case of repetition, penalties and sanctions are folded.
 VAT Returns:
A monthly return should be filed for the VAT and or the
schedule tax due within two months following the tax accounting
month. As an exception, for the April tax return, the filing
deadline is 15 June. The return must be filed even if no sales are
made within the tax period. If the tax return is not filed before the
legal deadline, the ETA has the right to make a deemed
assessment by providing the basis of this assessment. This action
would not remove the legal responsibility of the taxpayer.
The date of submission of the tax declaration shall not be
different from the tax on the added value. The legislator shall
limit this date to the necessity of submitting it within 60 days of
the expiry of the tax period. The penalties and Sanctions
mentioned above in the tax shall also apply to the value added in
case of subject to a schedule tax if the Registrar does not submit
the declaration or delay in submitting it for the dates specified by
law.
 Tax Exemption:
Exemption from the value added tax differs from the
refund of tax. For the refund of tax means that tax has fallen due
on a certain commodity then has been refunded, due to its having
157
been re-exported or due to a mistake in collection. Exemption

from the value added tax, means not collecting the tax on a
certain commodity or service despite its being subjected to tax.
That is due to economic or social reasons, or in order to avoid tax
duplication. The tax legislator has dealt with the cases of
exemption from the VAT Ander Articles 23 to 30of law
No.(67)of 2016 as follows :
(1)Exemptions granted on reciprocal basis or international
comity:
Exempting some commodities for the members of
diplomatic and consular corps on condition of reciprocity.
These commodities are:
a) Local or imported commodities purchased by the
members of diplomatic and consular cops for their
personal use and for the use of their husbands/ wives
and their minor children.
b) Purchases of Embassies and Consulates for official use

in terms of local or imputed commodities, apart from
the foodstuffs, liquors and tobaccos. In relation to cars,
exemption shall be within the limits of one car for
personal use for the diplomat, and five cars for the
official use of consulates. It is permissible to increase
158
this number by agreement of the Ministry of Foreign

affairs.
c) What is imported for the personal use by employees of
diplomatic and consular delegations and missions in
terms of personal luggage, furniture and household
items, and one second-hand car, provided it is imported
during six months from the arrival of the beneficiary of
such exemption. This term may be extended by
agreement of the Minister of Foreign Affairs.
According to Article (23) of the Law, it is prohibited to
dispose of the items which were exempted according to the
previous Article during the five years following the exemption
before informing the Tax Admin authority on and paying the tax
due, according to the condition of these items and their value and
the rate of the tax prevailing on payment date.
According to Article (25) of the Law, it is permissible to
exempt what is imported for the personal use of some prestigious
foreigners with the aim of international comity by decree from
the Minister of Finance in agreement with the Minister of
Foreign Affairs.
159
(2) Exemption of samples and personal belongings and

luggage:
According to Article (26) of the Law,N0,67,2016the
following shall be exempted from the VAT:
 Samples which are used up for analyses in
governmental laboratories.
 Personal belonging not - for - trade such as modals,
decorations, and sport prizes.
 Personal belongings and luggage related to passengers
arriving from abroad.
 Imported substitutes for damaged or lost items which
were previously imported and on which the tax was
paid, in mil.
 Re-imported items from. previously exported quantities
on. which tax had been paid in full at the lime of
provided that the Tax Administration ascertains that.
(3)The endowments, grants, donations and presents to a State
administrative body, and what is imported by the
scientific and education al institutes.
Also, according to Article (28) of the Law, the Minister of
Finance may, in agreement with the related Minister,
160
exempt some commodities from tax in the two following

cases
a) Grants, donations and presents for the State's
administrative body or units of local administration.
b) Imports for scientific educational or cultural
purposes by the scientific and educational institutes
and by the scientific research institutes.
(4) Exemption of commodities and equipment that is
necessary for armament and national security purposes:
Article (29) of the Law stipulates the exemption of all the
commodities, equipment's, instruments, and services which serve
purposes of national defense and security, as well as raw
materials, production requisites and parts entering in their
manufacture.
In addition to the previous exemptions, medicines are
exempted from the value added Tax. and which were previously
covered by a decree from the Minister of Hygiene exempting
them from the consumption tax. Moreover, the legislator allowed
in the Law the president of the Republic to issue a decree
exempting some commodities from the tax, to be submitted to the
People's Assembly during fifteen days from date of its
promulgation, for ratification.
161
(5) Other Exemption:

There are 57 exempted goods and services listed in a separate
table including:
 Tea, sugar and milk.
 Gas, electricity and water.
 Banking services that are legally restricted to banks only.
 Medicines and the active substances used in the
manufacture of medicines, whether locally manufactured or
imported.
 Health services except plastic surgery and weight loss
services other than for medical purposes.
 Public education and scientific research services, including
schools offering international curricula
 Public hospitals, public Medicare services, public clinics,
and non-profit organizations
 Free radio and TV transmission services
 Sale and lease of vacant plots, agricultural lands, buildings
and housing and non- housing units.
 Advertisement services
 Tax Collection:
The tax-payer is the natural or corporate person who is
requisitioned to collect the tax and pay it to the Tax
162
Administration, whether he is an industrial producer, a trader or a

supplier of a service subjected to the tax, and whose sales have
reached the registration limit stipulated by Law (L.E. 500,000);
as well as each importer of a commodity or service subjected to
tax, for trading purpose, whatever the size of transactions. Also,
amongst tax-payers are natural or corporate persons who has not
reached the registration limit, and who has submitted an
application for the registration of his name with the Tax
department
The VAT due on imported goods has to be paid together
with the custom duties due released by the custom duties
authorities.
The registrar shall be responsible for the performance of the tax
revenue periodically to the respective responsibility with the
approval of the monthly and within the specified dates for
submitting the declaration.
The head of the authority may determine the party of payment

and its means.
The tax on imported goods shall be carried out at the stage of
their release from customs in accordance with the procedures
prescribed for payment of the customs tax. The final release of
the imported goods shall not be permitted before the payment of
163
both the value added tax and the schedule tax by two separate
receipts.
The head of the authority may temporarily release the machinery

and equipment for the production of his goods or performance of
the service, in accordance with the terms of payment, the limits,
rules and guarantees that issued by a decision from the head of
authority. The final release of these goods shall not be permitted
before the performance of the value added tax and schedule tax
or both of them are fully eligible.
The head of the authority may also determine the appropriate

guarantees by the value of the value added tax or schedule tax or
both of them due to the goods released by export or according to
any of the private customs regulations.
Accordingly, the payment of value added tax or schedule tax or

both of them tax shall on entitlement to the machinery and
equipment that used in the performance of the service or the
production of exempted goods from the value added tax or
schedule tax or both as follows:
164
1. Payment of 5% from the value added tax or schedule tax

or both due to the machinery and equipment, at the time of
the temporary release to the competent customs.
2. Payment of the rest of the amount of the value added tax or

schedule tax or both due to four annual installments
equally, so that the first installment of them after the
expiration of two years from the date of temporary release.
3. In the case of delay in payment of any of these

installments, shall be entitled to all the remaining
installments in addition to the additional tax and shall be
calculated from the date of the temporary release of this
commodity until the date of payment.
4. It is not permissible to dispose of machinery or equipment

that released temporary, except after notification of
authority and payment of the remaining tax due.
5. The concerned party shall submit any of the following
guarantees:
a. Letter of bank guarantee or security by a monetary value
of the value added tax or schedule tax or both due.
165
b. An endorsement of approval of the assets and its branches

to pay its value added tax or schedule tax or both of them.
c. Any other guarantees accepted by the Customs Authority
shall be sufficient to pay the public treasury dues (such as
a security document issued for the authority and under its
request by its value added tax and schedule tax or both, to
mention in the document the maturity value of the
document to the authority as soon as its request even if the
owner object).
In all cases, the previous tax shall not be refunded to the
machinery and equipment temporarily released except after
confirming the payment of the full amount of the tax on it.
The payment of value added tax or schedule tax or both of them

of the buses and imported passenger cars for the purpose of the
tourist transportation service which subject to tax are as follows:
1. Pay 25% of the value of the value added tax or schedule
tax or both due upon customs release.
2. Payment of the rest of the amount of the value added tax
or schedule tax or both to two equal annual installments
after the expiry of the year from the date of release.
3. In case of delay in payment of either of the two
installments, the full amount of the value added tax or
166
schedule tax or both of them shall be paid and the

additional tax due, which shall be calculated from the date
of the provisional release until the date of payment.
4. It is not permissible to dispose of buses or passenger cars
except after notification of authority and payment of the
remaining taxes due.
5. The concerned party shall submit any of the
aforementioned guarantees in the case of machinery and
equipment mentioned above.
 Surtax:
In case of non-performance of the taxpayer on the specified date,
he shall be liable to pay an additional tax of 1.5% of the tax value
or unpaid schedule tax for each month or part thereof from the
end of the specified period of payment until the date of payment
and shall be collected with the tax and the same Procedures.
Example:
Calculate the additional tax on one of registers in the Egyptian
tax authority, knowing that the tax to be supplied L.E 60000, and
that the delay period is one month and 20 days later to end the
specified period of payment.
167
Solution:
The additional tax is calculated as follows:
1. Duration of delay = 1.5 months approximates to two
months
2. The additional due tax = 60,000 × 1.5% × 2 = L.E 1800
If a person who is not a resident and is not registered in the

authority of selling services in the country to a registrar not
required to carry out his activity or to the government entity or
public entity or economic or any other entity, the beneficiary of
the service is committed to the calculation of the due tax and
payment of authority within 30 days from the date of sale, In the
case that the non-resident and non-registered person does not
appoint a representative or agent.
In the case that the Registrar imports his services required for his
activity that subject to tax , he shall be treated as an importer and
supplier of such service at the same time.
In case of non-performance of the tax on the specified date,

additional tax is required and collected with the tax and the same
procedures.
168
The collection of the tax and other amounts due under Law No.
(67) For the year 2016 shall be followed by the provisions of
Law No. 308 of 1955 regarding administrative detention and the
provisions and procedures provided for in this Law.
This applies to all companies and establishments, regardless of

the legal system established in accordance therewith.
On the other hand, the Egyptian legislator stipulated that the law
should be divided by the law between what is due to the registrar
of authority and what is due to him and the duty of performance
under any tax law applied by the authority or any of the
authorities of the Ministry of Finance.
169
VAT Summary Report For the Month of …, 2018

Amounts
Details before sales Sales tax
tax
I: Sales: xxx xx
Product ….. xxx
Product ….. xxx
Product ….. xxx
Product…… Exempted xxx -
Adjustment : Sales returns (xx) (xx)
Cash discounts (xx) (xx)
Total sales / VAT due xxx xxx
II: Purchases:
Deductible Purchases:
Product ….. xxx xxx
Undetectable purchases:
Product ….. xxx
Product ….. xxx
Adjustment : Purchase returns (xx) (xx)
Total purchases / VAT paid xxx xxx
Total VAT payable (1) – (2) xxx
170
General Example:
(1)Total sales during March amounted to L.E. 805,000 as
follows:
 L.E. 200,000 of commodity (a) taxable at the rate of 14%.
 L.E. 505,000 of commodity (b) taxable at the rate of 14%
 L.E. 100,000 of commodity (c). tax-free.
(2) Trade discount on sales of commodity.(a) amounted to 20%.
Transport expenses of commodity (b) amounted to L.E. 5,000
included in the value of the commodity.
(3) Sales returns during the month amounted to L.E. 100,000 as
follows:
L.E. 30,000 of sales of commodity (a) L.E.
50,000 of sales of commodity (b) L.E.
20,000 of sales of commodity (c) L.E.
(4) The purchases (inputs) during the month amounted to L.E.
300,000 as follows:
 L.E. 100,000 purchases subjected to tax were used in
producing commodity (a) of which L.E. 30,000 from an
unregistered seller with the Administration.
 L.E. 150,000 purchases subjected to tax were used in the
171
production of commodity (b).

 L.E. 50,000 purchases exempted from tax were used in
producing commodity (c).
(5) The tax rate on inputs was 10%.
Required:
Prepare a summary of the value added tax.
Solution:
 Trade discount on commodity (a)
 200,000  20%  L.E. 40,000
 Value of commodity after exclusion of discount
 200,000  40,000  L.E. 160,000
 Value of commodity (b) subjected to tax
 505,000  5000  L.E.500,000
 Purchases authorized to be deducted from commodity (b)
 100,000  30,000  L.E.70,000
 Sales return of commodity (a) after exclusion of discount
 30,000()(30,000  20%)
= 30,000  6000  L.E.24,000
 Deductible purchases = 70,000 from commodity
a)150,000 from commodity
b)L.E. 220,000
172
The summary of General Sales Tax

Description Value without tax The tax
First The Sales:
- From commodity (a) 14% 160,000 22400
- From commodity (b) 14% 500,000 70000
- From commodity (c) exempted 100,000
760,000 92,400
Less the sales returns:

- Commodity (a) 24,000 3360
- Commodity (b) 50,000 (94000) 7000 (10360)
- Commodity (c) 20,000
The net sales/the VAT due 666,000 82040
Second: The purchases
(inputs):
Discountable purchases (10%) 220,000 22,000 (22000)
Un discountable purchases 30,000
exempted purchases 50,000
300,000
The tax due on sales 60,040
Example:
The following are some of the data relating to one of the
registered taxpayers in Egyptian Tax Authority who does not
deal in the goods and services subject to the tax included in the
schedule accompanying the law for the month of 2017:
173
a. Its total cash sales of taxable goods and sales in the local
market have been reached L.E 100,000 (of which
L.E15000 were rebounded during the month).
b. The total sales were exported to abroad have been reached
L.E 40,000 and the total sales from the exempted goods
from the tax amounted to L.E 20,000.
c. The value of the taxable services performed by the
Registrar during the period has been reached L.E 60,000.
d. The value of goods purchased from the local market was
from a registered seller has been reached L.E 30,000 (from
which L.E 4000 were rebounded during the month).
e. The value of machinery and equipment imported from
abroad for use in the activity and purchased under the law
of sales tax amounted to L.E 24,000,Note that the tax to be
determined and its value 5% has not yet been deducted.
If you know that the previous credit balance L.E 350, required:
prepare the tax summary for the value added.
174
Solution:
The summary of value added
Value without
Description The tax
tax
First The Sales:
- Items subject to tax 14% 100,000 14,000
-Services subject to tax14% 60,000 8400
- Exported goods subject to 40,000 -
tax (zero)
- Exempted goods from tax 20,000 -
220,000 22,400
Less the sales returns: (15,000) (2,100)
The net sales/the VAT due 205,000 20,300(1)

(inputs):
Local goods 14% 30,000 4,200
Machines & Equipment 24,000 3,360
5% 54,000 7,560
Purchases Returns (4,000) (560)

Net purchases\input tax 50,000 7,000(2)
The due Tax(1-2) 13,300
Previous credit balance (350)
The payable Tax 12,950
175
Example:
The following data are related to the Adam & Slim factory (6th
of October city) registered with the Egyptian Tax Authority No.
320\601\250,And which does not deal in the goods or services
subject to the tax contained in the schedule annexed to the Law
No.(67) for year 2016, for the month of January 2017:
1- Sales:
a. The total cash sales of domestic goods sold in the local
market amounted to L.E 250,000 detailed as follows:
L.E 60,000 of the product (a) taxable (of which L.E 20,000
products have been rebounded during the month) – L.E 100,000
of the taxable product (b) (of which L.E 15,000 products are
rebounded) – L.E 40,000 of the product (c) exempt from tax -
Total value of goods exported to abroad amounted to L.E 50,000.
b. The value of taxable services performed during the period

amounted to L.E 70,000.
2. Inputs:
a. The total of the purchases of domestic goods amounted to
L.E 55,000 detailed as follows:
176
L.E 25000 taxable products used in the production of the

product (a) of which goods valued at L.E 5,000 purchased by
an unregistered seller – L.E 20,000 taxable products used in
the production of the product (b) (of which L.E 5000 are
rebounded during the month) – L.E 10,000 products exempt
from the tax used in the production of the product (C).
b. The value of imported goods purchased during the period
amounted to L.E 8000.
c. The value of machinery and equipment purchased from the
domestic market and used in the production L.E 20000.
If you know that the balance of the Registrar for the authority
on January 1, 2017 was a creditor of L.E 760.
Required:
1. Prepare the tax summary for the value added.
2. Preparation of Form No. (10) V.A.T.
177
Solution
[1] Prepare the tax summary for the value added
First The Sales:
-Services subject to tax14% 70,000 9800
- Exported goods subject to 50,000 -
tax (zero)
- Exempted goods from tax 40,000 -
320,000 32,200
Less the sales returns: (35,000) (4,900)
The net sales/the VAT due 285,000 27,300(1)

(inputs):
d) Products 14%
- Domestic 40,000 5,600
- Imported 8,000 1,120
e) Services - -
48,000 6,720
Purchases Returns (5,000) (700)
Net purchases\input tax 43,000 6,020(2)
The due Tax(1-2) 21,280
The payable Tax 20,520
178
Notes:
1) The inputs were analyzed as follows:
Inputs and The A B C Total
product
Deductible 20,000 20,000 - 40,000
exempted - - 10,000 10,000
Not deductible 5,000 - - 5,000
The total 25,000 20,000 10,000 55,000
2) Machinery and equipment purchased from the

domestic market after the application of the tax law
shall be subject to a value of 5%, and shall be
recoverable in the first tax decision to be installed and
used in the activity.
[2] Tax endorsement on value added
Name\Adam and slim factory Place\ 6 October city

The address\ 6 October
Registration number\320 601 250
The period\ 12-2016 the end of period\31-12
Phone number\
E-mail\
179
Tax category Value of Value of Total value The tax

goods services
14% 160,000 70,000 230,000 32,200
Zero 50,000 - 50,000 -
Exempted 40,000 - 40,000 -
The total 250,000 70,000 320,000 32,200
Tax settlements (35,000) (4,900)
Value added tax 27,300
The inputs
Inputs Domestic Imported Total value The input
tax
Goods 40,000 8,000 48,000 6,720
Services - - - -
Machinery - - - -
and
Equipment
The total 40,000 8,000 48,000 6,720
(-) Tax settlements (700)
The input Tax 6,020
Tax summary
Value added Inputs Tax Due Tax Previous Pay or
Tax credit balance discount
27,300 6,020 21,280 760 20,520
payment
180
Form No. (100) V.A.T:

This form is to approve the tax on the goods and services subject
to the schedule tax only, and listed in the first item of this
schedule and takes the following form:
The tax on goods and services schedule attached to the tax

law on the value added
Name\ The place\

The address\
Registration number\
The period\ the end of period\
Telephone number\
E-mail\
181
The sales
Tax category The good or The quantity The value The tax
service
Zero
Exempted
The total tax
Tax
settlement
The Schedule
Tax
Repayment of machinery and equipment / settlements
Statements The value The tax
Domestic Imported
Goods
Machinery and
equipment
parts of
machinery,
equipment and
spare parts
The tax
182
Tax summary
The The Tax The Due Previous Payment or
Schedule Tax credit Discount
Tax balance
Example:
The following are some data relating to a trader who sells some
of the schedule products attached to the tax law on the value
added, which is subject to tax at a rate of 5% of its value, as of
February 2017:
a. The total sales amounted to L.E 50,000, of which L.E 8000

returned during the month.
b. The total value of goods exported to the outside L.E
30000, as the value of goods exempt from the tax equal to
L.E 20000.
c. The value of machinery and equipment imported from
abroad for use in the activity from the bill of the supplier
L.E 50000, the insurance amounted to L.E 3000, discharge
expenses L.E 2000 and the expenses of internal transport
and installation L.E 12000.
183
d. The value of parts of machinery, equipment and spare parts

used in the production of schedule products subject to tax
and purchased from the domestic market is L.E 10000.
If you know that the rate of customs tax is 20% and that the
previous credit balance L.E 200. Required: Prepare the tax
summary for this trader.
Solution:
Prepare tax summary
First The Sales:
- Exported goods subject 30,000 -

to tax (zero)
- Exempted goods from 20,000 -
tax 150,000 5,000
Less the sales returns: (1,000) (50)
The net sales/the VAT

due 149,000 4,950(1)
Second: Payments of
184

machinery &
Equipment:
a) Machinery &
Equipment
5%
- Domestic - -
- Imported 55,000 2,750
b) Parts of
machinery,
Equipment &
Spare parts 1,400
14% 10,000 -
-
- Domestic
- Imported
(4,150)(2)
The due Tax(1-2) 65,000 800

The payable Tax 600
185
Notes:
1. The value of the imported machinery and equipment
purchased from abroad and the tax due thereon shall be
calculated as follows:
a. The value of the machinery and equipment taken as a
basis for linking the customs tax= L.E 50,000 + L.E 3,000
Insurance + L.E 2,000 discharge expenses = L.E 55,000
b. Add the customs tax (20%) so the total is equal to= 55,000
+ 11,000 = L.E 66,000
c. Schedule tax = 66,000 × 5% = L.E 3,300
Note that the Registrar is entitled to recover this tax instead of
settling it.
2. The tax on the parts of machinery, equipment and spare
parts purchased from the domestic market shall be subject
to tax at a rate of 14%. The Registrar shall be entitled to
settle them within the limits of his schedule tax due from
them until they are exhausted.
Form No. (10\100) V.A.T:
This form relates to the dealer in the goods and services
subject to the schedule tax, in addition to the tax value added
and listed in second provision in this schedule, with the
deduction of the tax of the inputs of the tax value added only,
and are taken as follows:
186
Endorsement
Schedule tax and the value added tax
The name\ The place\

The address\
The registration number\
The period\ The end of period\
The phone number\ E-mail\
Schedule tax
Tax category The value (1) The tax
Goods Services
Zero
Exempted
The schedule tax
Tax settlements
Due Schedule tax
Value added tax

Tax category Total of Value added The Tax
Tax
Total Tax
Tax settlements
Value added Tax
187
Inputs
Statements The value The tax

Domestic Imported
Goods
Services
Machinery and
equipment
Parts of
machinery and
equipment and
spare parts
Total Tax
Tax Settlements
The Tax
Tax summary
Value Added The Tax The Due Tax The previous Debit or
Tax (2) (1+2)=3 credit balance Credit
(1) (4) (5)
188
Exercise
Questions (1):
item
The commodities taxes and duties in the Arab Republic of
Egypt developed
 Characteristics of VAT
Questions (2):
The commodity needs, for its production, raw materials the
cost of which amounts to L.E 600 with the producer of the
commodity selling it to the wholesaler for the amount of L.E 900
who seals it in turn to the re-taller for the amount of L.E 1400,
with the retailer selling the commodity to the end consumer for
L.E 1600, and on the assumption that the 14% is the rate.
REQUIRE:
Calculate the tax due on the commodity using the two
methods.
Questions (2):
items.
189
 The commodities taxes and duties in the Arab Republic of

Egypt developed.
 Characteristics of VAT.
Questions (3):
who seals it in turn to the re-taller for the amount of L.E1100,
L.E 1600, and on the assumption that the14% is the rate.
REQUIRE:
methods.
Questions (4):
Discuss the following:
 Value added tax avoid the defects and problems which
accompanied the application of the consumption tax.
 Characteristics of value added tax.
190
Questions (4):
L.E 2000, and on the assumption that the14% is the rate.
Required:
methods.
Questions (5):
L.E 1600, and on the assumption that the 14% is the rate.
REOUIRE:
methods.
191
Questions (6):
An industrial producer keeps regular books and is
registered with the sales tax administration.
The following details about the producer were available for
the month September 2005:
1. Total sales during September amounted to 650,000 LE as
follows :-
 200,000 LE of commodity (X) taxable at a rate 14%
 300,000 L.E of commodity (y) taxable at a rate 24%
 150,000 L.E of commodity (Z) tax free
2. Sales returns during the month amounted to :
 40,000 L.E of commodity (x)
 30,000 L.E of commodity (y)
 20,000 L.E of commodity (z)
3. The purchases (inputs) during the month amounted to
100,000 L.E as follows :-
 40,000 L.E purchases subjected to tax were used in
producing commodity (y)of which 10,000 L.E from an
unregistered sailor with the administration
 50,000 L.E purchases subjected to tax bought from a
registered seller used in producing commodity(x)
192
 10,000 L.E purchases exempted from tax used to produce

commodity (z)
Knowing that the tax rate on inputs is 10%
Required:- Prepare a summary of the value added tax.
Questions (7):
Explain:
 The commodities taxes and duties in the Arab Republic of
Egypt developed
 Characteristics of general sales tax
Questions (7):
An industrial producer keeps regular books and is
registered with the sales tax administration.
The following details about the producer were available
for the month September 2018:
1. Total sales during September amounted to 650,000 LE as
follows :
 200,000 LE of commodity (A) taxable at a rate 14%
 300,000 L.E of commodity (B) taxable at a rate 24%
 150,000 L.E of commodity (C) tax free
If you learn that the commercial discount of 10% on
commodity(A) and L.E 5000 transportation expenses on
193
commodity(B).
(2)Sales returns during the month amounted to :
 40,000 L.E of commodity (A)
 30,000 L.E of commodity (B)
 20,000 L.E of commodity (C)
(3)The purchases (inputs) during the month amounted to 100,000
L.E as follows :-
 40,000 L.E purchases subjected to tax were used in
producing commodity (A)of which 10,000 L.E from an,
unregistered sailor with the administration
 50,000 L.E purchases subjected to tax bought from a
registered seller used in producing commodity(B)
 10,000 L.E purchases exempted from tax used to produce
commodity (C)
Required:- Prepare a summary of the VAT.
194
Exam
Exam
195
Exam
Faculty of Economics and Business

Accounting department [Acc401]
SPRING-2009
Final Exam
Answer the following question:-
Question one :-(40 points)
The following is the profit and loss of the ABC partnership for 2006:-
Salaries & wages 4500Gross profit 8000
Depreciation 500Discount received 500
Advertising 1000Dividends 500
Donations 180Sundry revenue 2000
Discount allowed 300
Commission 700
Bonus to employees 1000
Tax & Duties 120
Net profit 1500
11000 11000
On tax examination, the following facts were revealed:-
1- Salaries included 600 to A &400 to B for management.
2- Commissions include L.E 200 To C for profitable transaction.
3- Donations paid L.E 100 To individuals.
4- Advertising expenses include L.E 900 For 3 years.
5- General Expenses included 600 interests on capital
6- Sundry revenues include L.E 400 capital gains, L.E 700 profits on
revaluation.
7- Goods in-transit of L.E 2500 not yet including the stock attend
REQUIRED:- Determine tax base on partnership profits
( comment on your answer )
Question two:-(30 points)
196
Exam
An industrial producer keeps regular books and is registered with the sales
tax administration.
The following details about the producer were available for the month
September 2008:-
1-Total sales during September amounted to 900,000 LE as follows :-
- 280,000 LE of commodity (X) taxable at a rate 14%
- 420,000 L.E of commodity (y) taxable at a rate 20%
- 2000,000 L.E of commodity (Z) tax free
2- Sales returns during the month amounted to :
-100,000 L.E of commodity (x)
-50,000 L.E of commodity (y)
-20,000 L.E of commodity (z)
3-The purchases (inputs) during the month amounted to 150,000 L.E as
follows :-
- 60,000 L.E purchases subjected to tax were used in producing commodity
(y) of which 10,000 L.E from an unregistered seller with the administration
- 70,000 L.E purchases subjected to tax bought from a registered seller used
in producing commodity(x)
- 20,000 L.E purchases exempted from tax used to produce commodity (z)
Required:- Prepare a summary of the value added tax
Question three:-(15 points)

Write the characteristics of the following:-
- value added tax.
Accelerated depreciation.
197
Exam
Misr University for Science and Technology

FALL -2008
Final Exam
Advertising 1000Recovered bad debts 200
Donations 1000Otherrevenues 7000
Bad debts 400
Revaluation losses 2000
Net profit 9400
20000 20000
1- Salaries included 1000 salaries to the owner
2- A new machine was purchased and used in production starting
from Jan.1,2006 its cost was 4000 the firm did not record any
depreciation for that machine
3- Advertising Expenses include 800 huge campaign for 4 year
starting this year.
4- Donations consisted of 500 to government and the balance to
recognized charities
5- The firm did not take legal actions to collect the bad debts
7- The cost of ending inventory recorded was 4000 its actual cost was
9000 and its selling price was 13000(the firm used to determine
inventory value based on the cost or selling price whichever is
lower)
198
Exam

tax administration.
September 2005:-
follows :-
(y)of which 10,000 L.E from an unregistered seller with the administration
Write the short notes on the tax treatment of the following items.
1-Revenues of securities
2-Recovered bad debts
3-Expenses not supported by documents
4-Wages and salaries
5-Donations
199
Exam

Summer -2009
Final Exam
If a specific business prepares 1ts ending financial accounts at Dec.31the
business had the following transaction in 2007:
A- On March15, purchased new machines for L.E 8000
B- On June15, purchased used machines for L.E 12000
C- On November 30, sold machines for L.E 3000
If you learn it the beginning of machines at 1 January 2007 was L.E
20000 and the machines was used through the year 2007
Required:- Compute the taxable depreciation expense for the year 2007
Question two :-(30 points)
Bad debts 400
Net profit 9400
20000 20000
On tax examination, the following facts were revealed:1-Salaries included
1000 salaries to the owner2-A new machine was purchased and used in
200
Exam
production starting from Jan.1,2006 its cost was 4000 the firm did not
3-Advertising Expenses include 800 huge campaign for 4 year starting
this year
4-Donations consisted of 500 to government and the balance to
5-The firm did not take legal actions to collect the bad debts
6-General Expenses included 600 interests on capital
7-The cost of ending inventory recorded was 4000 its actual cost was
9000 and its selling price was 13000(the firm used to determine
inventory value based on the cost or selling price whichever is lower)
Question Three :-(30 points)
tax administration.
September 2005:-
If you learn that the commercial discount of 10% on commodity(x) and L.E
500 transportation expenses on commodity(y)
201
Exam

follows :-
(y)of which 10,000 L.E from an unregistered seller with the administration
202
Exam

Fall -2010
Final Exam
Question one :- (60 points)
Bad debts 500
Net profit 9400
22800 22800
production starting fromJan.1,2006 its cost was 4000 the firm did not record
any depreciation for that machine
3-Advertising Expenses include 1200 huge campaign for 4 year starting this
year
4-Donations consisted of 600 to government and the balance to recognized
charities
7-Goods in-transit of L.E 2500 not yet included in the stock attend
203
Exam
Question three :- (30 points)

tax administration.
The following details about the producer were available for the
month September 2008:-
3-The purchases (inputs) during the month amounted to80,000 L.E as
follows :-
- 30,000 L.E purchases subjected to tax were used in producing
commodity (x)of which 10,000 L.E from an unregistered seller
with the administration
- 30,000 L.E purchases subjected to tax bought from a registered
seller used in producing commodity(y)
- 20,000 L.E purchases exempted from tax used to produce
commodity (z)
Explain Characteristics of value added tax
204
Exam

SPRING-2010
Final Exam
- Accelerated depreciation.
- Expenses not supported by documents.
- Wages and salaries.
- Donations.
A,B are partners in a general partnership in Cairo, they started their activity
on 1/1/2009, the following is the profit and loss account for the year ended
31/12/2009showed Net profit of a value 200,500 L.E
The following data are also given:-
1- The Inventory on 31/12/2009 showed that purchased goods of a
value 60,000 L.E was not recorded because it didn't arrive yet
2- 1500,000 salaries of employees(monthly salaries 20,000)
3- 50,000 salary for partner A for management
4- 30,000 interest on capital
5- 30,000 advertising campaign for a period of 3- years starting
1/1/2005
6- 20,000 provisions for doubtful accounts(for 10% of clients)
7- 26,000 building rental for building occupied by company
(monthly rent 2000 L.E)
205
Exam
8- Donations of value 30,000 L.E includes 15000 L.E donation to Cairo

university,10,000 L.E to Elwefaa Wel-Amel
The remaining for the poor family
9- Revenue included:-
3000 L.E discount
5000 L.E gains realized by the company from securities recorded in
Egyptian stock exchange.
REQUIRED:-
Calculate the taxable net profit
tax administration.
- 300,000 LE of commodity y (X) taxable at a rate 14%
2- Trade discount on sales of commodity (x) amounted to 20%transport
expenses of commodity (y) amounted to L.E 5000 including the value of the
commodity.
- 20,000 L.E of commodity (y)
- 10,000 L.E of commodity (z)
follows :-
206
Exam
commodity (x)of which 10,000 L.E from an unregistered seller

commodity (z)
207
Exam

fall-2011
Final Exam
Question one:-(15 points)
- General sales tax..
- Wages and salaries.
- Donations
Salaries & wages5000Gross profit10000
Depreciation1000Discount received1000
Advertising1000Dividends1000
Donations1000Sundry revenue5000
General expenses1500
Discount allowed300
Commission700
Bonus to employees1000
Tax & Duties500
Net profit5000
1700017000
On tax examination. The following facts were revealed:-
Salaries included 1000 to A &500 to B for management.
Commissions include L.E 500 To C for profitable transaction
Donations paid L.E 500 To individuals.
Advertising expenses include L.E 900 For 3 years.
208
Exam
General Expenses included 600 interests on capital

Sundry revenues include L.E 500 capital gains, L.E 1000 profits on
revaluation.
Goods in-transit of L.E 2000 not yet included in the stock attend
tax administration.
September 2008:-
1-Total sales during September amounted to 900,000 LE as follows
follows :-
(x)of which 10,000 L.E from an unregistered seller with the administration
in producing commodity(y)
209
Exam

SPRING-2011
Quiz two
- An industrial producer keeps regular books and is registered with the sales
tax administration.
1-Total sales during September amounted to 600,000 LE as follows:-
- 300,000 LE of commodity y (X) taxable at a rate 14%
2- Trade discount on sales of commodity (x) amounted to 20%transport
expenses of commodity (y) amounted to L.E 5000 including in the value of
the commodity.
- 20,000 L.E of commodity (y)
- 10,000 L.E of commodity (z)
follows :-
commodity (x)of which 10,000 L.E from an unregistered saller
commodity (z)
210
Exam

Spring -2011
Final Exam
If a specific business prepares 1ts ending financial accounts at Dec.31the
business had the following transaction in 2007:
A- On March15, purchased new machines for L.E 8000
B- On June15, purchased used machines for L.E 12000
C- On November 30, sold machines for L.E 3000
If you learn it the beginning of machines at 1 January 2007 was L.E
20000 and the machines was used through the year 2007
Required:- Compute the taxable depreciation expense for the year 2007
Depreciation500Discount received 500
Advertising1000Recovered bad debts200
Donations1000Otherrevenues7000
Bad debts400
Revaluation losses2000
Net profit9400
2000020000
211
Exam
year
7-The cost of ending inventory recorded was 4000 its actual cost was 9000
and its selling price was 13000(the firm used to determine inventory value
based on the cost or selling price whichever is lower)
Question three :-(30 points)
The commodity needs, for its production, raw materials the cost of which
amounts to L.E 400 with the producer of the commodity selling it to the
wholesaler for the amount of L.E 800 who seals it in turn to the re-taller for
the amount of L.E1100, with the retailer selling the commodity to the end
consumer for L.E 1600, and on the assumption that the14% is the rate.
REQUIRE:-
Calculate the tax due on the commodity using the two methods
212
Exam

Spring -2011
Final Exam
A partnership between A and B of a capital 150000 divided between them at
a ration 3 : 2.
- Interest on capital is 10% annually.
- A’s monthly salary is L.E. 1000
- Profit and loss are divided equally.
Net profit for the year ending 31/12/2005 was L.E. 60000
By inspection of the records it was found that:
1-The company send to an agent merchandise at a cost L.E.50000 It was
included in the ending inventory as it was not sold yet. It was found that on
31/12/2005 half of the goods were sold for L.E. 30000 (the commission is
5%).
2- The partners withdrew goods at a cost L.E.3000 for personal use. The
selling price of the goods is L.E.4000. The withdrawals were not recorded.
3- The company sold its residuals for L.E.7000 and donated this sum to El-
Helal hospital.
Neither the selling nor the donation was recorded.
4- The interest on a deposit at Misr Bank was recorded as revenue L.E.5000,
plus L.E.12000 revenue of shares listed in the Egyptian stock exchange.
5-The salaries of employees were L.E.52000 included salaries of January
2006 and L.E. 5000 loans to employees and annual salary of partner A.
6- L.E.40000 allowances for doubtful accounts and L.E.15000 interest on
capital at a rate 10%.
213
Exam
Required:
Calculate taxable base.
Question two:- (30 points)
The commodity needs, for its production, raw materials the cost of which
REQUIRE:-
214
Exam

Fall-2011
Final Exam
Question one:- (55 Marks)
Depreciation500Discount received500
Advertising1000Recovered bad debts200
Donations1000Otherrevenues7000
Bad debts400
Revaluation losses2000
Net profit9400
2000020000
On tax examination the following facts were revealed:1-Salaries included
year
7-The cost of ending inventory recorded was 4000 its actual cost was 9000
and its selling price was 13000(the firm used to determine inventory value
based on the cost or selling price whichever is lower)
215
Exam
 ( comment on your answer

Question three:-(35 Marks)
tax administration.
September 2005:-
follows :-
(x)of which 10,000 L.E from an unregistered seller with the administration
in producing commodity(y)
216
Exam

spring-2012
Final Exam
AB partnership between A and B. The following profit and loss account:-

Depreciation1000Discount received 500
Advertising1000Dividends1000
Donations180Sundry revenue2000
Discount allowed300
Commission700
Bonus to employees1000
Tax & Duties120
Net profit1500
1150011500

1- Salaries included 600 to A &400 to B for management.
2- Commissions include L.E 200 To A for profitable transaction.
3- Donations paid L.E 100 To individuals.
4- Advertising expenses include L.E 900 For 3 years.
6- Sundry revenues include L.E 400 capital gains, L.E 700 profits on
revaluation.
217
Exam
7- General Expenses included L.E 500 insurance against fire. And

L.E 400 a deposit for a governmental bid.
8-Anew machine was purchased and used in production its cost was
4000 the firm record normal depreciation for that machine
9- L.E.2000 allowances for doubtful accounts

QUESTION TWO:(20 points)
An individual purchased a patents for some products as follows:-
-L.E 30,000 for the patent of product (A)on first march 2008.
-L.E35,000for the patent of product (B)on first July 2008
If you learn that :
-He sold the patent related to product (A) at the end of June 2009.
at L.E 32,000.
-He prepare his accounts on 31,Dec. of every year.
Required:-
Compute the tax depreciation that must be considered
as deductible costs for the year 2008&2009.
Question three :-(30 points)
1) Write the characteristics of general sales tax
2)The commodity needs, for its production, raw materials the cost of which
REQUIRE:-
218
Exam
Reference
[1] The Value Added Tax Law No. 67 for 2016.
[2] The Unified Tax Law No. 91 for 2005, and its Executive
Regulation.
Book:
Tahseen Al-Shazly – Tax Accounting.
219
Exam
220

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Misr University For science & Technology

College of Business & Economic

. The Commercial and Industrial Activities Tax

. Value added tax

Dr. Ghada Nabil Massoud

All rights reserved. No part of this book may be reproduced in any

Chapter Two : The commercial and industrial

Chapter Three : Value added tax ................................. 97

The current Egyptian tax system consists of two main groups of

Tax is defined as being a cash levy collected by the state from

Direct and indirect taxes:

Personal and in-kind taxes:

imposed at a fixed rate on the taxable amount (the tax

Examples: of the tax which is retained at source by and

The Commercial and Industrial

First: characteristics of this tax:

Second: scope of tax:

The tax shall apply to:

[6] Juridical persons non- resident in Egypt with regard to the

Third: Tax Base:

the commercial and industrial activity, prescribed in Book (2)

In other words. Taxable Revenues include for Example:

the provisions of the non- governmental organizations law

9. They yields obtained by the juridical persons on securities

Fifth: Tax rate:

In exception to the rate mentioned in the profits of Suez

Sixth: Some Important Procedures:

and institutions, and the organizations and establishments

Determining taxable revenues:

On the other hand, the taxable profit is measured in

The difference between of the accounting net profit (ANP)

Accounting net profit (ANP), as it appears in the

The Most important kinds of revenues which appear in

price, thus L.E. 16000 is added to taxable

(A) Profit on Liquidation of Capital Assets:

(B) Revaluation Profits:

 If there is no change in the legal status of the business

Less: Accumulated depreciation:

L.E. 2800 which it included into the profit as revenue. When

If compensations received from insurance companies as a

[3] Foreign Currency Gains:

[4] Revenues of Securities:

[5] Returns of Deposits and Saving Accounts:

[6] The discount received is an income the cash

1000 in cash and the rest is in the form of computer

4 - Profits on sale of securities listed on

Adjusted Net Profit

Deductible Expenses by Law:

[2] Depreciation of assets:

. 5% of the costs of buying establishing developing, renewing or

. 10% of the costs of buying, developing or renewing any of

intangible assets that are bought including goodwill in every tax

. The following two categories of business assets are to be

depreciated according to base of depreciation system.

 No depreciation to be computed for land, artistic and

The value exceeds The value doesn't exceed

Then the value according to which depreciation is calculated:

For example if a specific business purchases anew machinery

annually, (according to tax law) thus, annual depreciation

Ending balance 7,750

value of premiums shall not exceed L.E. 10,000 a year.

are paid to the general social security authority or to insurance

deductible in the same year in which they were incurred by