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Tax Assessment Delay Penalties Applied from the Final Tax Assessment Date

“A case successfully held by our office”

Submitting the tax return by taxpayers to the tax authority is a legal requirement, and the legislator has imposed a penalty for late submission starting from the day after the specified deadline.

According to the law, tax returns must be filed during the following periods:

  1. Before April 1st of each year for natural persons.
  2. Before May 1st of each year for legal entities, and the tax authority is responsible for accepting the returns on the taxpayer’s behalf.

The taxpayer is obligated to pay the due tax amount based on the filed return on the same day of submission.

If the tax authority possesses documents that prove discrepancies between the return and the actual situation, it is required to conduct an examination, correct the return, or make amendments. The tax authority must determine the taxable income and notify the taxpayer of the tax assessment elements. The tax authority is not allowed to conduct or amend the assessment except within five years from the date of the deadline for submitting the tax return for the tax period.

The taxpayer has the right to appeal against the tax assessment within 30 days from the date of receiving it. If the taxpayer does not appeal, the assessment becomes final according to the law.

Tax differences are not payable unless the assessment becomes final. The amount of the tax differences can be determined, and the taxpayer becomes aware of it, from that date onwards. The tax authority is not allowed to pursue the taxpayer for late payment of tax differences retroactively to the day after the specified deadline for tax return submission, even if the assessment is finalized at a later time due to an amendment in the return and the resolution of the dispute through direct agreement with the internal committee.

One of the cases handled by Helena Constantine, the attorney, In this case, the tax authority calculated a late payment penalty on tax differences from the day after the specified deadline for tax return submission for years of dispute, even though the final linkage of the tax return occurred at a later time due to amending the return and concluding the dispute through a direct agreement with the internal committee.

In this case, an appeal was filed against the tax authority’s decision, arguing that the assessments made by the tax authority, which contradicted the taxpayer’s declarations, are not final. In such cases, the tax differences are not due for payment unless there is an agreement before the internal committee, a decision from the appeal committee, or a court judgment determining the net profits of the taxpayer’s activity. Only then can the tax be calculated, and late payment penalties are applicable based on that calculation for failing to pay the tax on time.

The court ruled to annul the decision of the appeal committee, which had calculated late payment penalties retroactively. The court stated that the entitlement to late payment penalties for failing to pay the tax on time must be based on the duration of the delay from the date of the final linkage. It should not be retroactively applied to the day following the expiration of the specified deadline for filing tax returns. Any assertion to the contrary would contradict the legislator’s intention, which is that the condition for the tax to be due is when the tax assessment is final, the amount is determined, and the taxpayer is aware of it. This is the fundamental basis for determining late payment penalties, and the court’s decision reinforces this principle.

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Written By

Helena Constantine - Partner, Lawyer

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