The imposition, alteration, or repeal of general taxes requires legislative action
Tax exemption is an exception from the general tax system and is one of the types of tax incentives that a government grants to a specific group of individuals or organizations. Its aim is to reduce the tax burden on projects to encourage investment and provide economic support. Tax exemption encompasses all tax exemptions imposed by the state or some of them.
As tax exemptions have played a significant role in achieving fairness among different segments of society and promoting savings and investment in a way that leads to national productivity growth through the establishment of new projects or expansion of existing ones, there have been significant changes in tax procedures in recent years.
The Investment Guarantees and Incentives Law, issued under Law No. 8 of 1997, granted financial companies a tax exemption on commercial and industrial activity revenues for five years. It also provided companies and entities established within new industrial zones, new urban communities, and projects funded by the Social Fund for Development with a ten-year tax exemption.
Despite the issuance of Law No. 91 of 2005, which introduced several amendments to tax procedures, Article 3 of its provisions maintained tax exemptions for companies and entities established in accordance with the Investment Guarantees and Incentives Law or for companies and entities that had not yet commenced their activities or production as of the date of enactment of Law No. 91 of 2005, provided that they commence their activities or production within a maximum period of three years from the date of this law’s implementation.
As a result, it is not permissible to impose income taxes on the profits of these companies during the exemption period or impose any additional or temporary taxes on them because such temporary taxes are, in essence, considered income taxes.
Herein, we refer to one of the cases handled by Helena Constantine, the attorney, where the Tax Authority had demanded an additional temporary tax for one year on income based on Law No. 44 of 2014, which set the rate of this temporary tax at 5% on income exceeding one million Egyptian pounds for natural persons or the profits of legal entities.
Helena Constantine filed a lawsuit to annul this demand and clear the company’s liability, arguing that the tax claim in dispute included a period within the tax exemption granted to the company. It is not permissible to impose any taxes on the claiming company during the tax exemption period, and the temporary tax claimed is nothing more than an income tax.
Helena Constantine filed a lawsuit to annul this demand and clear the company’s liability, arguing that the tax claim in dispute included a period within the tax exemption granted to the company. It is not permissible to impose any taxes on the claiming company during the tax exemption period, and the temporary tax claimed is nothing more than an income tax.
Link to case
To conclude, this article aims to emphasize that the establishment, modification, or cancellation of general taxes can only be done by law, and no one is exempt from paying them except in cases specified by the law. Imposing taxes or fees other than those stipulated by the law is not permissible.
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