Tax Implications for Temporary Labor in Network Marketing
This article aims to highlight one of the challenges faced by companies that rely entirely or partially on temporary labor. We will clarify some tax treatments from both the company’s and the worker’s perspective, considering they are subject to income tax under the conditions set by the governing Egyptian tax law, specifically Law No. 91 of 2005 and its amendments.
Definition of Temporary and Irregular Labor
Before delving into the case study, it is crucial to clarify the following concepts:
Temporary Labor: This refers to workers who are not legally bound by formal employment contracts and social security, such as those in construction and electronic marketing.
Irregular Labor: This includes workers linked to companies under contracts for specific goals and durations, such as experts and engineers in specialized fields.
Determine the Tax Obligations
Companies in Egypt consider taxes and social insurance significantly due to the penalties imposed for non-compliance with regulatory laws. When determining the treatment of temporary labor, the economic cost of each tax and insurance treatment for this type of labor is measured as follows:
Type of Labor: Whether the labor is irregular and whether the cost of registering such labor in the company results in high costs, such as marketers for specific companies like pyramid marketing firms, typically relying on housewives marketing online.
Nature of the Work: It is essential to define and describe the work performed by these workers, such as labor in construction companies, which entails different tax obligations compared to other types of irregular or temporary labor.
Steps for Tax Treatment to the Temporary Labor in Network Marketing Companies
Description of Labor: Temporary and uninsured labor consists of marketers working from home via the internet, without a tax card and not registered on the company’s payroll (e.g., housewives).
Nature of the Work: Network marketing of company products via the internet without fixed salaries or benefits.
Tax Treatment Case by Case
First Case: As company employees: This approach leads to social insurance obligations, resulting in higher costs due to the large number of such workers. The minimum social insurance wage in 2024 is EGP 2,000 per month, but the tax burden is reduced as the worker benefits from personal exemptions and exempt brackets according to the latest law amendment, totaling EGP 60,000 annually and expanding the first tax brackets.
Second Case: If the company is not resident in Egypt: the burden of tax will be on the employee himself, and he must register with the Egyptian Tax Authority, submit a declaration, calculate, and deduct the tax, and submit it himself, in accordance with the instructions and directives of the Tax Authority.
Third Case: Personal basis: Treating the amounts they receive as marketing commissions, thus deducting 20% as per the law as a tax on commissions and paying this tax on the designated form (if the worker does not have a tax card) or deducting 5% if the transaction is habitual (if there is a tax card).
Conclusion
Every individual has the right to enhance their income through legitimate means. This group strives to improve their living conditions, but it is essential to preserve the state treasury’s resources without impacting its ability to fulfill its obligations. Ensuring compliance with tax payments is crucial, as failure to meet these obligations affects the state’s ability to meet its commitments to its citizens.
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