Tax on natural person's income - commercial transactions - in the Egyptian tax law

Income Tax on Natural Persons – Commercial Transactions – in the Egyptian Tax Law

Introduction

With Egypt’s rapidly evolving economy, income tax on commercial transactions for individuals has become one of the most important tools for ensuring tax fairness and providing sustainable financial resources for the state. Whether you are an entrepreneur, a small trader, or the owner of a startup business, understanding how commercial income tax applies gives you a competitive edge and strengthens your legal compliance—positively impacting your business reputation and customer trust.

What Is Income Tax on Commercial Transactions for Individuals?

This is a tax imposed on the annual net income earned by an individual from commercial activities, such as selling goods or providing services, whether the activity is conducted independently or within a partnership. It covers anyone operating on their own account or running a business that is not registered as a joint-stock company.

• Income Tax Law No. 91 of 2005 and its amendments is the primary reference governing the imposition of income tax on commercial activities for individuals in Egypt
• The tax is levied on annual net profits after deducting all business-related expenses, such as cost of goods,rent, salaries, and other operating costs.
• Tax is calculated using a progressive bracket system, with the rate increasing as annual income rises.

* Up to EGP 40,000 per year: exempt from tax.

* EGP 40,001 to 55,000: 10%.

* EGP 55,001 to 70,000: 15%.

* EGP 70,001 to 200,000: 20%.

* EGP 200,001 to 400,000: 22.5%.

* EGP 400,001 to 1,200,000: 25%.

* Above EGP 1,200,000: 27.5%.

Each individual is entitled to an annual personal exemption of EGP 20,000 when calculating the tax.

The government has recently focused on supporting small and medium enterprises by introducing a simplified tax system based on annual revenue rather than complex deductions and expenses. This makes tax compliance easier and encourages entrepreneurship:

* If total annual revenue is less than EGP 500,000: 0.4% of revenue.

* EGP 500,000 to less than 1 million: 0.5%.

* 1 million to less than 2 million: 0.75%.

* 2 million to less than 3 million: 1%.

* 3 million to less than 10 million: 1.25%.

*10 million to less than 20 million: 1.5%.

To benefit from this system, you must register electronically with the Tax Authority and submit returns on time.

1-Determine total annual revenuefrom the business activity.

2-Deduct operating expenses to arrive at net profit (unless using the simplified system for small businesses).

3-Apply personal exemptions (EGP 20,000 per year)

4-Identify the appropriate tax bracketfor the net income.

5 -Calculate the tax dueaccording to the progressive rates

6- Pay the tax electronicallyvia the Tax Authority’s portal to avoid penalties.

Boosts business credibilitywith customers and suppliers.

Avoids legal penalties and fineswhich can reach up to 100% of the original tax for cases of evasion or delay

Enables access to incentives and facilitiesoffered by the state for small and medium enterprises.

Supports the national economyby contributing effectively to funding public services

* Keep accurate financial records and electronic invoices to simplify tax calculations.

* Consult an accountant or tax expert to avoid mistakes in your returns.

* Stay updated on legal amendments through the official website of the Egyptian Tax Authority.

Income tax on commercial transactions for individuals in Egypt is a key step toward transparency and tax justice. It also opens doors for entrepreneurs and small business owners to grow in a clear and supportive legal environment. Tax compliance is not just a legal obligation—it’s a powerful marketing tool that enhances your business’s standing and gives you greater confidence in the marketplace.

The information provided is based on the latest laws and amendments issued by the Egyptian Tax Authority and Ministry of Finance, with reference to official sources and specialized reports to ensure accuracy and reliability.