Withholding Taxes in Egypt: Essential Compliance for Corporates
Dividends to Resident Corporate Shareholders
Withholding Taxes in Egypt are imposed on dividends paid to resident corporate shareholders at rates of either 10% or 5%.
Dividends to Non-Residents
Egyptian companies are required to withhold a 10% tax on dividends paid to non-resident corporate shareholders for shares not listed on the Egyptian Exchange (EGX). For dividends paid on EGX-listed shares, a reduced flat rate of 5% applies. However, double tax treaties (DTT) between Egypt and other countries may reduce or eliminate these rates.
Interest Payments to Non-Residents
The previous exemption of WHT on interest from loans exceeding three years has been abolished for the private and public sectors, although it remains for government and public juridical persons. Loans predating the new tax law (Law No. 30, enacted on 16 June 2023) can still enjoy the exemption if at least one interest payment was made before the new law’s issuance.
Royalties to Non-Residents
Royalty payments to non-residents are subject to a 20% WHT. Applicable DTTs may reduce this rate. The specific ministerial decree details the treatment of these payments.
Service Payments to Non-Residents
Services provided by non-residents are taxed at a 20% WHT. DTTs can exempt these payments if the services are performed outside Egypt without a permanent establishment in Egypt, as specified by each treaty.
Tax Treaties
Egypt has signed DTTs with over 50 countries, which can alter the tax treatment of transactions with treaty countries. Below is a summary of WHT rates for dividends, interest, and royalties under both non-treaty and treaty conditions:
Treaty by Countries:
| Recipient | Dividends | Interest | Royalties |
| Albania | 10% | 10% | 10% |
| Algeria | 10% | 5% | 10% |
| Austria | 15% | 15% | – |
| Bahrain | 5/10% | 10% | 10% |
Note: Specific rates and conditions apply based on the beneficiary’s ownership and other criteria.Procedures for Withholding Tax on Non-Residents
According to Ministerial Decree No. 771 of 2009, reduced WHT rates from DTTs are not applied automatically. Initially, a 20% tax is imposed, with the possibility for the foreign recipient to claim a refund for the difference. Required documents must be submitted to the tax authority, and a special unit processes these refunds.
WHT on Local Payments
For payments exceeding EGP 300, the WHT rates for local services and supplies are:
- Contracting and supplying: 1.0%
- All types of services: 3.0%
- Commissions: 5.0%
These rates serve as advance payments of the Corporate Income Tax (CIT) and are not additional costs.
Conclusion
Navigating the complexities of withholding taxes in Egypt requires a thorough understanding of the applicable rates, relevant treaties, and procedural requirements. By staying informed and compliant, businesses can optimize their tax liabilities and avoid potential penalties. Leveraging the expertise of a knowledgeable tax consultant can be invaluable in this regard.
Andersen Egypt, with its extensive experience and deep understanding of the local tax landscape, is well-positioned to provide comprehensive tax consultancy services. They can assist in ensuring compliance, maximizing tax efficiency, and mitigating any risks associated with non-compliance.
To find out more, please fill out the form or email us at: info@eg.Andersen.com
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