Understanding Article 87(bis) in Egypt’s Law No. 91 of 2005

Article 87 (bis) is one of the most significant articles in Law No. 91 of 2005 and its amendments. This article first appeared in Law No. 11 of 2013 and came into effect on May 19, 2013. It was later amended by Law No. 26 of 2020, with the new amendment taking effect from May 7, 2020, as follows:

The taxpayer is required to pay an additional amount on the final tax at a rate of (20%) of the difference between the final tax amount and the tax amount stated in the tax return if this difference is less than (50%) of the final tax amount. If this difference equals (50%) or more of the final tax amount, the rate is (40%). In the case of not submitting the tax return, an additional amount of **40%** of the final tax value is due. This is applicable if the final tax value is determined after exhausting normal appeal procedures. These rates are reduced by half if an agreement is reached between the taxpayer and the tax authority before referral or resorting to the Appeals Committee.

Case Studies:

To better understand how Article 87 (bis) applies in practice, consider the following scenarios:

Example 1: Difference Less Than 50% of Final Tax:

If the final tax is 135,000 EGP and the tax stated in the return is 100,000 EGP, the difference is 35,000 EGP, which is 26% of the final tax. The additional tax according to the article is 35,000 * 20%.

Example 2: Difference Equal to or Greater Than 50% of Final Tax:

If the final tax is 250,000 EGP and the tax stated in the return is 100,000 EGP, the difference is 150,000 EGP, which is 60% of the final tax. The additional tax according to the article is 150,000 * 40%.

Example 3: No Tax Return Submitted:

If the final tax is 120,000 EGP and the tax stated in the return is zero, the difference is 120,000 EGP. The additional tax according to the article is 120,000 * 40%.

It should be noted that these rates are reduced by half if an agreement is reached between the taxpayer and the tax authority before referral or resorting to the Appeals Committee.

Conclusion

Article 87 (bis) aims to regulate the process of paying the final tax and ensuring compliance with the submission of tax returns. By imposing additional penalties on the differences between the final tax and the tax return, the state seeks to enhance transparency and tax compliance. This article serves as an effective means to reduce tax evasion and encourage taxpayers to adhere to tax laws.

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