In-Kind Benefits and Taxation Under Egypt’s Law No. 91 of 2005

In-kind benefits are among the elements introduced by the legislator within the revenues of salaries and their equivalents according to Article 9, Paragraph 1 of Law No. 91 of 2005, which states the following:

Application of Tax on Salaries and Their Equivalents

Everything due to the taxpayer as a result of his work for others, whether under a contract or without a contract, on a regular or irregular basis, whatever the names, forms, or reasons for these dues, and whether they are for work performed in Egypt or abroad and paid for from a source in Egypt, including wages, bonuses, incentives, commissions, grants, additional wages, allowances, shares, and profits, and in-kind and cash benefits of all kinds.

This means that in-kind benefits (including health care) are considered elements of salaries and their equivalents and therefore are deductible costs for the company that provides them to its employees, according to Article 17 (if these wages and salaries are related to operation or trading), which states:

The profits of the commercial and industrial activity are determined based on the revenue resulting from all commercial and industrial operations, including the profits resulting from the sale of the enterprise’s assets stipulated in Clauses 1, 2, and 4 of Article 25 of this law, the profits realized from compensation received by the taxpayer due to the destruction or seizure of any of these assets, as well as liquidation profits realized during the tax period, all after deducting all deductible costs. They are also considered deductible general and administrative expenses according to Article 22 of Law No. 91 of 2005 (for administrative wages and salaries), which states:

• Net taxable commercial and industrial profits are determined based on gross profit after deducting all costs and expenses necessary to achieve these profits. The costs and expenses to be deducted must:
  • Be related to the commercial or industrial activity of the enterprise and necessary for practicing this activity.
  • Be real and supported by documents, except for costs and expenses not usually evidenced by documents.

Therefore, these benefits are deductible costs or expenses for the company. Regarding the salaries tax base on which the employment tax is calculated, Article 13 of Law No. 91 of 2005 specifies the exemptions for salaries and their equivalents as follows:

Without prejudice to other tax exemptions established by special laws, the following are exempt from tax:

• Social insurance contributions and others deducted according to social insurance laws or any alternative systems.
• Employees’ contributions to private insurance funds established according to the Private Insurance Funds Law No. 54 of 1975.
• Life insurance premiums and health insurance premiums for the taxpayer for his benefit, his spouse, or his minor children, and any pension insurance premiums.

In-Kind Collective Benefits:

• A- Meals provided to employees.
• B- Collective transportation for employees or its equivalent cost.
• C- Health care.
• D- Tools and clothing necessary for work performance.
• E- Housing provided by the employer to employees for work purposes.

Employees’ shares in profits decided to be distributed according to the law.

What is received by members of the diplomatic and consular corps, international organizations, and other foreign diplomatic representatives within their official scope, provided there is reciprocity and within the limits of that treatment. For Clauses 3 and 4, the total exemption for the taxpayer must not exceed 15% of net income or ten thousand pounds, whichever is less, and the same subscriptions and premiums cannot be exempted from any other income specified in Article 6 of this law.

The law referred in Article 9 to the executive regulations to determine the basis for estimating in-kind benefits, and Article 11 of the regulation’s states:

In applying the provisions of Article 9 of the law, in-kind and cash benefits mean everything the worker receives in cash or in kind without being compensation for expenses incurred in performing his work, provided it represents a personal benefit to him.

In-Kind Benefit Valuation Based on Market Value: Specific Estimations

A- Company cars placed at the employee’s personal disposal:
The benefit value is determined at 20% of the cost of fuel, insurance, and periodic maintenance related to these cars, whether owned by the company or rented.

B- Mobile phones:
The benefit value is determined at 20% of the expenses related to the phone throughout the year.

C- Loans and advances provided by employers:
If the employer provides a loan to the employee exceeding the total amount the employee receives during the six months preceding the loan without interest or at an interest rate less than 7%, the benefit value is determined at 7% or the difference between the loan interest rate and the specified interest rate if the loan interest rate is less than 7%.
The loan includes any form, including advances or amounts shown in the employer’s books and records and charged to the employee’s account.

D- Life insurance policies for the employee or his family or properties:
The benefit value is determined by the premiums paid by the employer during the year.

E- Company shares granted at less than the fair value:
The benefit value is determined by the difference between the fair value of the share at the time of acquisition and the value at which the employee was charged.
If there are restrictions on the transfer of shares, the benefit is not realized until these restrictions are lifted.

In all cases, the employer must withhold and remit the tax according to Article 14 of the law and include in the annual reconciliation forms all benefits received by each employee according to the previous rules. The recipient of the revenue must withhold and remit the tax if required by Article 16 of the law. Thus, health care is among the elements exempt from employment tax (for the employee) according to Article 13 of the law without specifying a certain percentage.

Conclusion

This article discusses the concept of in-kind benefits within the revenues of salaries and their equivalents according to Article 9 of Law No. 91 of 2005, which considers them part of taxable revenues. The article explains that in-kind benefits, including health care, are deductible costs for the company providing them to its employees. It also discusses the tax exemptions related to salaries and in-kind benefits as stipulated in Article 13 of the same law, noting that some collective in-kind benefits such as meals, collective transportation, and health care are tax-exempt. The article explains how in-kind benefits are estimated based on market value, specifying the values of certain benefits such as cars, mobile phones, and loans. The article concludes by emphasizing the employer’s obligation to withhold and remit the tax according to Article 14 of the law.

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