Tax Refunds in Egypt Under Double Taxation Agreements

Tax refunds in Egypt are closely linked to the country’s network of Double Taxation Avoidance Agreements (DTAAs), which aim to prevent the same income from being taxed in two different jurisdictions. In practice, however, the tax rates under local laws may exceed those stipulated in a DTAA. In such cases, the taxpayer has the right to request a refund of the excess tax paid in Egypt, within the procedural framework established by Unified Tax Procedures Law No. 206 of 2020.

Legal Basis

The legal foundation for tax refund claims in Egypt combines both domestic legislation and international treaties. Law No. 206 of 2020 on Unified Tax Procedures is the procedural framework that governs all stages of the taxpayer’s relationship with the Egyptian Tax Authority (ETA) — from registration, examination, and collection, through appeals and litigation, up to tax refunds. This law not only unified procedural channels but also introduced automation through electronic notifications, forms, and digital signatures. Thus, refund requests have become part of a digital system with defined deadlines and controls, governed by the law, its executive regulations, and ETA circulars.

At the international level, DTAAs regulate cross-border tax relations between the contracting states (source country and residence country), establish substantive rules for eliminating double taxation, and allow for the Mutual Agreement Procedure (MAP) to resolve disputes arising from treaty application or instances of actual double taxation. This mechanism is implemented through the competent authorities listed in Egypt’s country profile with the OECD, and its outcomes directly impact the ability to seek tax refunds under the procedural track of Law No. 206 of 2020.

Accordingly, tax refund claims rely on two complementary references: the procedural framework under Law No. 206 and its regulations, and the substantive international framework under DTAAs and their mechanisms, together forming a solid legal foundation.

Company Entitlement to Tax Refunds in Egypt

The right of companies to obtain a tax refund arises when there is a conflict between the provisions of Double Taxation Avoidance Agreements (DTAAs) and the actual application of tax collection or assessment in Egypt. In such cases, the taxpayer bears an excess tax burden which, under the treaty, should have been relieved either through exemption or through the credit method with progression.

This situation is commonly observed in several recurring practical scenarios. A prime example is where an individual provides services or carries out independent activities in a foreign country and is subject to tax there under the source country’s taxing rights. The same income is then included in the Egyptian tax base without applying the treaty-based credit or exemption, thereby creating double taxation that justifies a refund claim.

A similar issue arises with the profits of subsidiaries or permanent establishments where the source country has imposed tax, but when calculating the Egyptian tax liability, the credit is either not granted or is calculated on an incorrect base. This leads to actual double taxation, necessitating correction by way of refunding the amounts wrongfully collected.

The situation is also clearly illustrated in relation to passive income such as interest, dividends, or royalties, where withholding tax is applied at a rate exceeding the maximum limits prescribed under the treaty. For example, a withholding tax of 20% may be imposed under domestic law, whereas the applicable treaty limits the rate to 10%. Such income is then treated in Egypt as if it were not covered by the treaty, resulting in the collection of amounts in excess of those permitted under the treaty provisions.

Treaty-Based Relief Methods

Regarding the tax paid by Egyptian companies abroad, the treatment methods are based primarily on two main mechanisms. The first is the credit method, whereby Egypt allows taxpayers to deduct the tax they paid abroad from the tax due on their income in Egypt, up to the share of those profits in the tax due in Egypt. Therefore, if the foreign tax exceeds these limits, the excess portion is not deducted. The second is the exemption method, whether full exemption or progressive exemption, whereby the income subject to the agreement is excluded from the taxable base in Egypt and may be used to determine the tax bracket or rate on the remaining income.

As for the withholding tax imposed on non-residents in Egypt, Egypt follows the tax refund principle. A non-resident company must submit a refund request to the Egyptian Tax Authority, requesting the application of the tax treaty to recover the tax amount due for not applying the treaty. This may appear either in the form of a cash amount returned to the taxpayer after reviewing the request or in the form of a balance carried forward for settlement in subsequent returns.

Practical Refund Procedure in Egypt

Refund requests under DTAAs are handled by the Central Department for International Agreements at the ETA. The process begins with identifying the nature of the transaction and verifying treaty applicability. The taxpayer must then submit a refund request (electronically or in paper form per ETA circulars) along with supporting documentation.

The request undergoes examination and review, during which additional documents may be requested (certified translations, notarizations, etc.). A technical opinion is then issued, and the taxpayer is formally notified whether the refund claim has been accepted or denied.

Required Documentation

Under Income Tax Law No. 91 of 2005 (as amended), Unified Tax Procedures Law No. 206 of 2020, and ETA Executive Instruction No. 31 of 2022, non-resident companies must submit the following documents with their refund requests:

• Certified tax residency certificate of the non-resident income recipient, legalized by the Egyptian embassy/consulate in the residence country.
• Contract governing the transaction between the Egyptian and foreign company (in English plus a certified Arabic translation).
• Declaration by the non-resident that it is the beneficial owner of the income and that the income is not attributable to a permanent establishment in Egypt.
• Proof of ownership of the right generating the income.
• Incorporation documents of both the paying and receiving companies.
• Financial statements of the parties.
• Group ownership structure.
• Master file of the recipient company (if available).
• Supporting invoices.
• Proof of withholding tax payments and tax forms filed by the Egyptian payer.

الختام

Success in obtaining a tax refund is not based solely on a claim, but rather on a comprehensive documentary file that demonstrates every element of the right and reflects strict adherence to the provisions of the treaty and its limits. This is achieved within a legal framework represented by the procedural rules governed by Law No. 206 of 2020, as well as the executive instructions issued in this regard. Consequently, international tax transactions are regulated in light of international tax agreements in a manner that achieves tax justice.

Frequently Asked Questions

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