Tax on the income of natural persons - professionals - in the Egyptian Tax Law
The income tax on natural persons, particularly professionals, is a fundamental pillar of the Egyptian tax system, contributing to state funding and promoting social justice. The Egyptian tax law aims to regulate the imposition of this tax in a manner that takes into account the specificities of liberal and non-commercial professions, while achieving a balance between collecting financial resources and reducing the tax burden on taxpayers.
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Income Tax on Natural Persons – Professionals – in the Egyptian Tax Law
Introduction
Income tax on natural persons, especially professionals, is a fundamental pillar of the Egyptian tax system, contributing to state financing and promoting social justice. The Egyptian tax law aims to regulate the imposition of this tax in a way that considers the unique nature of free and non-commercial professions, striking a balance between resource collection and alleviating the tax burden on taxpayers.
Definition of Income Tax on Natural Persons and Professionals
Income tax on natural persons is a tax imposed on the annual net income earned by an individual from various sources, including salaries, commercial and industrial activities, as well as free and non-commercial professions. Professionals are individuals who practice an independent free profession, such as doctors, lawyers, engineers, and others whose work relies primarily on personal effort and professional expertise.
Scope of Tax Application on Professionals in Egypt
- The tax is imposed on the net revenues of free and non-commercial professions practiced independently by the taxpayer.
- This includes revenues generated from practicing the profession inside or outside Egypt if Egypt is the center of professional activity
- It also covers income from the sale or exploitation of intellectual property rights related to the professional activity
- The tax base also includes proceeds from the disposal of professional assets, transfer of expertise, and partial or total transfer of professional offices
Key Legal Provisions Governing Professional Income Tax
Income Tax Law No. 91 of 2005 and its Amendments
* The law imposes an annual tax on the total net income of resident natural persons, including professional income.
*The tax is calculated based on the annual net revenues after deducting profession-related expenses.
*These include operational and capital expenses, which are deducted from total revenues to determine the taxable net income.
*A progressive tax bracket system applies to the taxable income, with specific personal exemptions.
Recent Amendment
* The personal exemption threshold has been raised to EGP 20,000 per year.
* Tax brackets have been amended to start from 0% for income up to EGP 40,000, rising progressively to 27.5% for income exceeding EGP 1,200,000.
* These amendments aim to ease the tax burden on low- and middle-income groups, including professionals.
How to Calculate Income Tax for Professionals
- Determine total annual revenues from practicing the profession
- Deduct operational and capital expenses related to the profession to determine net revenues.
- Apply personal exemptions (such as the annual exemption of EGP 20,000).
- Identify the tax bracket in which the net income falls.
- Calculate the tax according to the progressive bracket rates.
- Sum the tax due for each bracket to obtain the total annual tax.
Table of Income Tax
Brackets for Natural Persons (Including Professionals) after the Latest
Amendment
Note:The total net annual income is rounded to the nearest ten pounds when calculating the tax.
Importance of Professional Income Tax in the Egyptian Tax System
Enhancing tax justice: By considering the unique nature of free professions that rely on personal effort and expertise.
Expanding the taxpayer base: By including professionals in the tax system while providing exemptions and facilitation.
Encouraging tax compliance: :By simplifying procedures and clarifying calculation rules
Supporting the national economy:By collecting sustainable financial resources that help fund public services.
Conclusion
.Income tax on natural persons, especially professionals, is a vital part of Egypt’s tax framework. Egyptian tax law carefully regulates this area by defining income sources, calculating net revenues, and applying fair tax brackets that consider different groups. The latest amendments reflect the state’s approach to enhancing social justice and easing the tax burden on middle- and low-income groups, including professionals, while ensuring the sustainability of state resources.
Professionals wishing to comply with tax regulations are advised to stay updated on tax laws and regulations and consult experts to ensure correct and effective tax application.
For more details or calculation examples, refer to the official legal texts issued by the Egyptian Tax Authority or use the online tax calculators available on the Egyptian Tax Authority’s portal.