Royalty Taxes in Egypt: Intellectual Property and Tax Law

In Consideration of investors in expanding their investments in Egypt benefiting from the numerous advantages offered by the Arab Republic of Egypt, aiming to maximize Net profits through the utilization of skilled labor, and geographical location advantages, and tax incentives provided by the government to investors, The Egyptian legislature has imposed a tax on royalties by issuing the Income Tax Law No. 91 of 2005 and the Unified Tax Procedures Law No. 206 of 2020. In this article, We will address the tax imposed on royalties, covering the following points:

Definition of Royalty

Egyptian law defines royalties as the amounts paid, regardless of their type, in exchange for the use or right to use copyrights for literary, artistic, or scientific works, including cinema films, patents, trademarks, designs, models, plans, confidential processes, or the use or right to use industrial, commercial, or scientific equipment, as well as information related to industrial, commercial, or scientific expertise, as well as information related to industrial, commercial, or scientific expertise.

Tax Treatment of Royalty Expenses

In Egypt, royalties paid by non-residents are subject to withholding tax, imposed at a fixed tax rate 20% of the original amount. However, reduced rates may apply if there is a double taxation treaty.
However, this rate may vary depending on the country of residence and the applicable tax treaties between Egypt and the country where the royalties are paid. The law allows entities that are required to continuously pay royalties abroad to request the Tax Authority’s opinion on the tax treatment and rate according to the double taxation treaty.

Tax Payment

The responsibility of deducting the tax lies on the payer of royalties, who must withhold the tax and remit it to the Egyptian Tax Authority through the designated payment channels on the first working day following the day on which the tax was deducted, using the prescribed form.

Taxation of Royalties and effects of International Agreements to Prevent Double Taxation and Tax Planning

Proper tax planning through experts such as Anderson Tax can assist investors seeking to utilize the advantages arising from these agreements between Egypt and other countries.

Structuring their transactions or managing the revenues from intellectual property rights can help reduce the tax liability on their investments.

Refund Excess Difference of Paid Tax

This can occur if the tax rate of the law exceeds the rate stipulated in the double taxation treaty. The Egyptian legislator allows to refund of the excess tax paid, And that can be done by submitting a written request to the International Agreements Administration, supported by the necessary documents such as (certificates of intellectual property rights or patents..).

Conclusion

Based on the above, it becomes clear to us that despite imposing a tax on the transferred royalty abroad, The Egyptian legislator granted many other tax privileges, represented by the possibility of reducing the percentage of tax withheld from the amounts paid, by requesting a pre-rolling /study from the competent tax administration or refunding the tax paid in excess, on the condition of there is treaty with a lower tax rate with the countries deals with, Anderson Egypt therefore has a group of tax experts or legal advisors familiar with Egyptian tax laws and international tax treaties, which helps its partners make the most of the available tax privileges.

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