Lecture Three

Chapter Two
Tax on Salaries and the Like

Edited by: Dr. Engy El Hawary

 Definition of Tax on Salaries.

“It is a direct Tax imposed on

Incomes from Salaries, Wages,
Remunerations (rewards)...and
Like Payments , paid to any
person residing in Egypt or
abroad for work rendered in
Egypt” .
 Nature of Revenue
Tax is imposed on all forms of payments (salaries, wages and the like salaries).

There is a difference between wages and salaries.

Salaries are sums paid, periodically Wages mean what the worker
(often monthly), to employees for
intellectual or mental work they
receives daily or weekly in
render to government, units of local return for manual work he
administration societies and renders to private or public
companies (private sector, public enterprise, companies, etc.
sector, or public business sector).

The term “the like salaries” includes any amounts that are
similar to periodic salaries such as bonuses, incentives,
commissions, allowances, tips or gratuities received by
workers in public places like hotels, cafeterias, and
entertainment houses.
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 Conditions for Levying Tax
The condition of applying tax on salaries is the existence of an

affiliation relationship between an employee and his employer, which

can be traced to one of the following:

1 - An Employment Contract under which the employee is subjected to

supervision and control of the employer.

2 -Laws and regulations, such as the relationship between the employee and the
government, establishing for him certain rights and duties as soon as he
assumes a public (civil) service job. (working in public sector)

3 - Interference of employer in the details of the work for which the employee
is charged as fixing the work time and place and inflicting disciplinary penalties
in case of the violation of his job duties (even with no contract).
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Features of Tax on Salaries

1- It is a direct Tax imposed on real persons

income , for work rendered in Egypt.

2- It is imposed on income of Egyptian Residents

and non- Egyptian Residents as long as it is derived
from the Egyptian Treasury.

3-These Incomes should be really available for

the beneficiary (i.e. employee).

4-The tax rate is Progressive means It is an

increasing percentage as value of the tax base
rises .

5-This tax considers family Allowances and

personal charges (i.e. 20,000 personal exemption).

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 Scope of Tax
This Tax is imposed on the following
Incomes :

1- Sums due to taxpayer from an Egyptian

treasury or from business carried out in Egypt.
2-Salaries and Remunerations of Chairmen and
Members of Board of Directors as follows:

In Public Sector Companies

In Public sector
companies or
whose capital is PARTIALLY In Private Sector
Companies, and
banks whose owned by private sector, the corporation
capital is totally salaries and remunerations
owned by are taxed as follows:
government.
Ordinary
shareholders’
If the person is remunerations are
The chairman If the person is a
not a not taxed.
shareholder,
and board shareholder,
salaries and
members' salary salaries and
remunerations
remunerations
and paid in return for
are not taxed The Chairman and
compensation because these Managing Directors
managerial work
amounts are part taxed only for the
are taxed as are taxed
of the company
employees. because he is
net profit (i.e
amounts made for
considered as an their administrative
dividends)
employee. (managerial) Work.
 Savings and Dividend Income

Capital gains from Dividends

▪ A 10% will be imposed on dividends paid by Egyptian

companies unlisted on the EGX to resident and non-resident
shareholders.

▪ The 10% will be reduced to 5% in 2 cases:

1. if the dividends are paid by Egyptian companies listed on

the EGX.

2. if the individual holds more than 25% of the capital or

voting rights of the distributing entity for at least two years.
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 • Capital gains realized by resident
shareholders from the sale of listed
Capital shares on the EGX should be subject
to CGT at the rate of 10%.
gains • Capital gains realized from the sale
of unlisted shares/securities should
be subject to individual income tax
from brackets.

selling • Capital gains realized from shares

invested abroad would be subject to
the individual income tax brackets
Shares (if Egypt is the centre of commercial
industrial or professional activity of
such individual).
©2009 Pearson Education, Inc.
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Publishing as Prentice Hall
To Calculate the Tax due
on Salaries

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Procedures for Calculating Tax base
Total Revenues: (all amounts should be ANNUAL) L.E L.E
1- Basic Salary XX
2- Variable Wages XX
3- Fringe Benefits XX
Total Annual Revenues XX
Deduct:
1- Sums exempted by special law xx
2- Sums to meet actual expenses(to perform the work) xx

3- Personal Exemption 20,000

4- Share of employee in social Insurance xx (xx)
Net annual revenues xx
5- Life and Medical and special Insurance premium: xx
15% x net revenue or 10,000 whichever is less

6- Share of workers in profits xx (xx)

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Taxable net revenue( annual tax base) xx