Navigating Tax Laws for Charitable and Non-Profit Entities in Egypt

The Egyptian Ministry of Finance, through the Egyptian Tax Authority, has developed a comprehensive guide to provide clarity on the tax treatment of charitable associations and non-profit organizations operating in Egypt. This guide serves as a crucial reference for employees of these organizations to understand their tax obligations and the benefits they may receive under Egyptian law.

Key Legislative Framework

The common reasons for increasing capital include:

• Income Tax Law (Law No. 91 of 2005 and its Amendments): Under Article 47 of the Income Tax Law, all profits and revenues earned by charitable organizations and non-profit institutions are generally subject to income tax. However, recognizing the social dimension of these organizations, the law grants them an exemption from income tax to the extent that they operate within the scope of their intended purpose, as outlined in Article 50, Clause 3.
• Value Added Tax (VAT) Law (Law No. 67 of 2016 and its Amendments): According to the VAT Law, all goods and services provided by taxable entities are subject to VAT, whether they are domestically produced or imported. However, certain subscriptions to sports clubs and other entities supported by the Ministry of Youth and Sports, as well as subscriptions to charitable organizations supported by the Ministry of Social Solidarity, are exempt from VAT.
• Unified Tax Procedures Law (Law No. 206 of 2020): This law outlines the procedural obligations for tax filings and registrations, emphasizing the requirement for non-profit entities to register with the Egyptian Tax Authority and maintain proper financial records.

Obligations for Charitable Organizations

While these entities benefit from several tax exemptions, they must comply with a set of obligations to maintain their exempt status:

• Compliance with Legal Requirements: Organizations must align their statutes with the Executive Regulations of Law No. 149 of 2019.
• Registration with the Tax Authority: Charitable organizations are required to register with the Egyptian Tax Authority at the appropriate tax office or electronically through the designated online system.
• Operational Restrictions: Organizations must operate within the geographical and objective boundaries specified in their founding documents, as approved by the Ministry of Social Affairs.
• Maintaining Records: Entities must keep accurate books and records, either in physical or electronic format, and retain them for the period stipulated by law.
• Filing Tax Returns: Annual tax returns must be filed in accordance with Article 31 of the Unified Tax Procedures Law.
• Withholding Tax System Compliance: Organizations must apply the withholding tax system on any payment exceeding 300 Egyptian pounds, as specified in Article 59 of the Income Tax Law.
• Quarterly and Annual Declarations: These must be submitted for payroll tax on employees’ salaries and wages.
• Payment of Solidarity Contribution: As per Article 40 of Law No. 2 of 2018, organizations are required to pay a solidarity contribution of 2.5 per thousand of their total annual revenues.
• Tax Payment on Bonds and Capital Gains: Entities must pay taxes on income from treasury bills and bonds, as well as on capital gains arising from their disposal, following the applicable laws.
• Notification of Real Estate Use: Organizations must notify the relevant tax office within 30 days of utilizing any real estate owned by the entity.

Maintaining Exempt Status

To ensure continued tax exemption, charitable organizations must strictly adhere to these obligations. Failure to comply can lead to the forfeiture of the exempt status and subject the organization to taxation at the rates prescribed by law.

Conclusion

Our team of experienced tax and legal professionals is ready to assist charitable organizations and non-profits in understanding and complying with these regulations. We offer comprehensive support, including tax advisory services, legal consultations, assistance with registration and filing requirements, and guidance on maintaining compliance to secure and preserve tax-exempt status. Our expertise ensures that your organization remains focused on its mission while we handle the complexities of the legal and regulatory environment.

To find out more, please fill out the form or email us at: info@eg.Andersen.com

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