Lecture Three

Chapter Two
Tax on Salaries and the Like

Edited by: Dr. Engy El Hawary

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
• The monthly tax Due = the annual tax divided by 12.

• For Foreign Experts :

The Tax rate is 10% on the total amount they receive
without any Deductions or Family Allowance.

• Any wages deductions as penalties is ignored.

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Income Annual net Annual net Annual net Annual net Annual net Annual
tax rate income less than income in- income in- income in- income in- net
600,000 between between between between
income
600,000 to 700,000 to 800,000 to 900,000 to more than
700,000 800,000 900,000 1,200,000 1,200,000

0% From 1 to
40,000
10% From 40,000 From 1 to
to 55,000 55,000

15% From 55,000 From 55,000 From 1 to

to 70,000 to 70,000 70,000

20% From 70,000 From 70,000 From From 1 to

to 200,000 to 200,000 70,000 to 200,000
200,000
22.5% From 200,000 From From From 200,000 From 1 to
to 400,000 200,000 to 200,000 to to 400,000 400,000
400,000 400,000
25% More than More than More than More than More than From 1 to
400,000 400,000 400,000 400,000 400,000 1,200,000

27.5% More than

1,200,000
 1-Taxable Revenues
• Rewards (except • Cars for personal use
leaving service (20% of its cost is
• The salary or reward). taxed).
wage • Mobiles (20% of its
• Incentives
prescribed in cost is taxed).

Fringe (in-Kind) Benefits

• Commissions. • Loans from the
the contract
• Overtime wages employer (7% of the
+ any

Variable wages
and grants loan amount excess
Basic Salary

increments • Allowances over the value of the

added to it. last 6 months paid
• Share in profits for
before by the
work employee. The excess
• Special Increments is taxed at 7%
(not added to the • Life Insurance paid by
basic) the employer.
• Social Increments. • Employee Stock
• Share of workers Options (only the
difference between
from profits.
market value and
• Encouragement amount invoiced is
reward taxed.
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 Prescribed Tax Exemptions
2-Tax Exemptions

3-Personal 4- 5- Employees’
2-Sums to meet Exemption Employee subscriptions in private
1-Sums actual 20,000 share in insurance funds, Life 6-Employee
exempted by expenses(collective annually social dividends
in-kind benefits): insurance
and Medical Insurance distributed
Special Laws: premiums
(a) Meals offered to . (its
-all special 15% of net revenue
employees at calculatio
increment (calculated by you)
workplace; n will be
(added + not
added). (b) Collective shown or L.E 10,000
transportation for later)
-Social whichever is less.
employees whether
Increment
the vehicles are If amount actually paid
owned or leased by
.Representatio choose the lowest of the
the emplyeer;
n allowance three of them
(c) Health care;
.University The insurance company
(d) Tools and should be an Egyptian.
allowance for
clothing necessary
government
for performing the
and public
work.
sector
employees only (e) Accommodation Calculate the net
provided by an
employer for work revenue after no. 7
performance.
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 Egypt’s New Social Insurance Law:(Jan.2020)
Social security contributions are levied on all Egyptian full-time employees

Who pays the

Old Rate New Rate
subscription?
• 26% on basic monthly
• 18.25% on total
salary
Employers on behalf of monthly salary (incl.
each employee • 24% on additional or basic and variable)
variable elements per
Employees working in
month
the private sector and
• 14% on basic monthly
the public sector
salary • 11% on total
An employee on behalf
• 11% on additional or monthly salary (incl.
himself / herself
variable elements per Basic and variable)
month
• 25% from the monthly
• 15% from the monthly
Employers and subscription income that the
The Employer or entrepreneur subscription income that the
Entrepreneurs (including insured chooses (the
on behalf of himself / herself insured chooses (a
shareholders) maximum is not defined
maximum of EGP1’000).
yet).

Egyptian employees Each employee on behalf of • 22.5% of the monthly • 21% of the monthly
working abroad himself / herself subscription income subscription income

Employees that fall under

• 13% from the minimum
non-regular category Each worker on behalf of
• Didn’t exist limit of the monthly
(example domestic himself / herself 8
subscription salary.
workers)
The New Social Insurance Law
• The comprehensive insurance salary is defined to include all actual amounts
received by the employee including the fixed salary, incentives, commissions,
increments, overtime payments, tips, and any other type of remuneration
received by the employee (subject to the below descripted minimum and
maximum threshold).
• The New Law excludes from the definition of the comprehensive insurance
salary certain types of allowances; including
▪ travel allowance,
▪ transportation allowance,
▪ meetings attendance allowance,
▪ uniform allowance,
▪ housing allowance,
▪ car allowance.

• However, the aggregate value of the excluded allowances shall not exceed 25%
of the employee’s comprehensive insurance salary.

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The comprehensive insurance salary (upon which the
contributions are based) shall be subject to the following
minimum and maximum amounts:

For 2020
• The minimum insurance salary is set at EGP 1,000/monthly (EGP
12,000/per year)
• The maximum insurance salary is set at EGP 7,000/monthly (EGP
84,000/per year)
The above minimum and maximum amounts will be increased 15% each year of
the coming 7 years starting from 1st January 2021.

For 2021

• min. 1000*1.15= 1,150 and max.7000*1.15=8,050) and so on.

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• For 2022, new update has been released as follow:
The minimum insurance salary is set at EGP 1,400/monthly
the maximum insurance salary is set at EGP 9,400/monthly
• For 2023, new update has been released as follow:
The minimum insurance salary is set at EGP 1,700/monthly.
the maximum insurance salary is set at EGP 10,900/monthy.
• For 2024
• the minimum insurance salary is set at EGP 1,955/monthly.
• the maximum insurance salary is set at EGP 12,535/monthy.

• For 2025
• The minimum insurance salary is set at EGP 2,300/monthly.
• the maximum insurance salary is set at EGP 14,500/monthy.

©2009 Pearson Education, Inc. Publishing as

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Prentice Hall
Practice
 Example 2-1: (public business sector employee)
In 2023, a public business sector employee monthly
receives a basic salary of L.E 15,000 (of which L.E 4000
special increment)- a transportation allowance of L.E 1,200
to meet actual expenses, a representation allowance of L.E
6,600, and a production incentives of L.E 5,500.
Given that:
1) He received L.E 150,000 from one of public business
sector companies ( of which L.E 20,000 a membership
remunerations and the other 130,000 for his share in
profits).
2) He pays L.E 1,400 monthly life insurance premium to
his favor.
3) His share in social insurance is L.E 1,200 monthly .
Required: Determine annual taxable net revenue for 2023.
TTaxable Revenues: L.E L.E
1 – Basic Salary(15,000* 12 months) Solution 180,000
2 – Transport allowance (1,200*12 months) 14,400
3 – Representation allowance (6,600*12months) 79,200
4 – Production incentives (5,500*12 months) 66,000
150,000
5 – sums received from a public business
sector company
Total Revenue 489,600
Deductions: L.E L.E
1 – sums exempted by special law
- special increment added (4000*12 mon.) 48,000
- Representation allowance (as he is governmental employee) 79,200
- Social increment --
2 – sums to meet actual Expenses (transportation exp.) 14,400
3 – Personal Exemption 20,000
4 – Share of employee in Social insurance(1,200*12 mon.) 14,400
Total deductions 176,000
Net Revenue 313,600

5 – life insurance
313,600*15%= 47,040
or fixed sum 10,000
Actually paid (1,400*12 MON.= 16800) 10,000 Lowest
6 – shares in profits of public sector company 130,000
140,000
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Taxable net revenue 173,600
 Example 2-2
A governmental employee gets monthly basic salary of L.E
5,000 (L.E 1,000 of which is special increment). In
addition, he receives L.E 1,550 as work nature allowance,
L.E 1,200 as representation allowance, L.E 100 as social
increment, L.E500 as transport allowance to meet actual
expenses, and L.E 1,500 as special increment not added to
the basic salary.
Given that:
• He pays monthly L.E 100 as life insurance premium of his
life for favor of his wife and L.E 50 subscriptions in
special insurance fund.
Required: Calculate taxable net revenues for 2021.
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 Solution
Calculation of Social Insurance:
Total salary
Basic salary 5000
work nature allowance 1,550
representation allowance 1,200
social increment 100
special increment (not added to the basic salary) 1,500
Total salary 9,350
Thus Maxi. Limit 8050*11% 885
Total 885
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 L.E L.E
1 – Basic Salary 5000*12 60,000
2- Variable Wages
Solution:
Work nature allowance 1,550*12 18,600
Representation allowance 1,200*12 14,400
Social increment 100*12 1,200
Transportation allowance 500*12 6,000
Special increment (not added to basic salary)1,500*12 18,000 58,200
Total Revenue 118,200
Deductions L.E L.E
1 – sums exempted by special law
special increment (1500+1000) *12 30,000
Representation allowance 1,200*12 14,400
Social increment 100*12 1,200
2 – sums to meet actual Expenses transportation 500*12 6,000
3 – Personal Exemption 20,000
4 – Share of employee in Social insurance 885*12 10,620
Total deductions 82,220
Net Revenue 35,980
5 – life and Special insurance
15% of 35,980 5,397
OR 10,000
OR Actually paid (100+50)*12 1,800 lowest
1,800
Taxable net revenue 34,180
•Annual Tax Due:
•From 0 to 40,000 Zero
Total tax due Zero

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