Tax Burdens Imposed on Labor Supply Companies in Egypt

In light of Egypt’s ongoing economic transformation and its growing status as a regional investment hub, skilled labor supply companies face a complex web of tax obligations that directly impact their service costs and overall competitiveness. While the current Egyptian tax law is robust in supporting economic growth, it also imposes significant financial and procedural obligations, ranging from corporate income tax and VAT, to withholding tax, social insurance contributions, stamp duties, and mandatory e-invoicing systems.

On the other hand, the Egyptian government has recently introduced a package of incentives under Law No. 6 of 2025 to support SMEs. This calls for strategic planning by labor supply companies to fully utilize opportunities and minimize tax burdens.

Let us explore the key tax obligations facing labor supply companies:

1. Corporate Income Tax

A flat rate of 22.5% is applied to the annual net profits of all economic activities in Egypt.

2. Value-Added Tax (VAT)

Labor supply services are subject to the standard VAT rate of 14% on invoice value. However, a 0% VAT rate may apply to services exported abroad or to special economic zones.

3. Withholding Tax (WHT) Obligations

Companies are required to withhold and remit taxes in accordance with Law 91 of 2005:

* Technical services for residents: 3%

* Technical and non-technical services for non-residents: 20%

* Dividend distributions: 10% (5% for listed companies)

4. Social Insurance Contributions

As of January 1, 2025, the minimum insurable wage has been raised to EGP 2,300, and the maximum to EGP 14,500. Contributions are split as follows:

11% by the employee

18.75% by the employer

5. Stamp Duties and Other Levies

Nominal stamp duty: EGP 1 per page on contracts and agreements (per copy)

Proportional stamp duty on bank loans: 0.4% annually on outstanding loan balances

6. Administrative Requirements & E-Invoicing

The Ministry of Finance has mandated the adoption of the e-invoicing system for businesses operating in Egypt as of July 2023, and e-receipts starting January 2025. Electronic registration is now a prerequisite for receiving incentives, avoiding penalties, and a significant step toward formalizing the economy and achieving tax justice.

Incentive Package for SMEs & Strategic Planning

Under Law No. 6 of 2025, Parliament has introduced a series of tax facilitations for companies with annual revenues up to EGP 20 million, including:

1- Simplified tax rates on gross revenue

2- Exemptions from development fees and stamp duties

3- Simplified accounting procedures: Adoption of streamlined accounting and electronic filings, with a mandatory five-year commitment to the system

Strategic Recommendations for Minimizing Tax Burdens

Although the existing legislative framework may appear complex to non-specialists, it is in fact, in our view, investment-friendly and aimed at promoting tax fairness. With effective strategic planning, companies can leverage the law’s benefits. Here are key recommendations:

- Choose the right legal structure that aligns with expected revenue and fixed tax costs.

-Run financial simulations to evaluate projected revenue and assess the trade-off between simplified tax rates and the standard income tax regime.

- Integrate early with e-invoicing systems to avoid penalties and gain access to electronic compliance-based incentives.

- Continuously monitor legislative updates to adjust financial performance accordingly and consult with a specialized tax advisor.

- Consider mergers or partnerships to increase ROI while benefiting from favorable tax brackets for smaller entities.

By integrating these recommendations into their operational strategy, skilled labor supply companies can enhance their competitiveness both locally and globally, maximize government incentives, and remain fully compliant with Egypt’s tax and legal framework