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Law Imposing a Temporary Surcharge

Law Imposing a Temporary Surcharge on Income
On 4 June 2014, the President issued a decree-law No. 44 of 2014 to temporarily impose an additional 5% tax to be levied on income greater than one million pounds for natural persons, as well as profits greater than one million pounds of legal persons in the given fiscal year (the “Law”).[1] The main effect of this Law is an increase in tax due on the income of natural persons (individuals) or on the profit of legal persons (corporations, banks and agencies) in excess of a million pounds per year, with a rate of only 5%. The 5% shall be charged on all funds exceeding the one million pounds, not on the one million pounds itself. The tax is to be applied for a period of three years, beginning with the current financial year. Consequently, the tax shall be charged on the income of natural persons, residents and non-residents for income earned in Egypt, as well as on the profit of legal persons residing in Egypt for profit achieved in Egypt or outside, or on the profit achieved through a permanent establishment in Egypt by non-resident legal persons, in accordance to the provisions of Articles 6 and 47 of Income Tax Law No. 91 of 2005. It is notable that a person subject to the tax increase may request to use the proceeds to finance a particular service project in the areas of education, health, or housing and infrastructure, among various projects that will be determined by a resolution of the Minister of Finance. It is noteworthy in this matter that this decision is yet to be implemented; however, the failure to identify and finance a particular project does not exempt a person from the tax at the end of the year because the choice of a particular project is optional, while the payment of the additional surcharge is mandatory. The final Article of the Law requires publication of the Law in the Official Gazette and implementation by the next working day; in this case, 5 June 2014.   [1] Presidential Decree-Law No. 44/2014 imposing a temporary additional tax on income, Official Gazette, Issue No. 22 (bis) (c), 4 June 2014.
On 4 June 2014, the President issued a decree-law No. 44 of 2014 to temporarily impose an additional 5% tax to be levied on income greater than one million pounds for natural persons, as well as profits greater than one million pounds of legal persons in the given fiscal year (the “Law”).[1] The main effect of this Law is an increase in tax due on the income of natural persons (individuals) or on the profit of legal persons (corporations, banks and agencies) in excess of a million pounds per year, with a rate of only 5%. The 5% shall be charged on all funds exceeding the one million pounds, not on the one million pounds itself. The tax is to be applied for a period of three years, beginning with the current financial year. Consequently, the tax shall be charged on the income of natural persons, residents and non-residents for income earned in Egypt, as well as on the profit of legal persons residing in Egypt for profit achieved in Egypt or outside, or on the profit achieved through a permanent establishment in Egypt by non-resident legal persons, in accordance to the provisions of Articles 6 and 47 of Income Tax Law No. 91 of 2005. It is notable that a person subject to the tax increase may request to use the proceeds to finance a particular service project in the areas of education, health, or housing and infrastructure, among various projects that will be determined by a resolution of the Minister of Finance. It is noteworthy in this matter that this decision is yet to be implemented; however, the failure to identify and finance a particular project does not exempt a person from the tax at the end of the year because the choice of a particular project is optional, while the payment of the additional surcharge is mandatory. The final Article of the Law requires publication of the Law in the Official Gazette and implementation by the next working day; in this case, 5 June 2014.   [1] Presidential Decree-Law No. 44/2014 imposing a temporary additional tax on income, Official Gazette, Issue No. 22 (bis) (c), 4 June 2014.